International Business: The Challenges of Globalization, 7e (Wild)
Chapter 4 Economics and Emerging Markets
1) China relies on its cheap labor for economic development and India on the brainpower of its
people.
2) Incentives and rewards for individual business initiatives are an important aspect of
collectivist cultures.
3) Individualist cultures tend to offer fewer incentives and rewards than collectivist cultures.
4) Entrepreneurs are businesspeople who accept the risks and opportunities involved in operating
new business ventures.
5) No nation has a completely individualist or completely collectivist cultural orientation.
6) Central planning is rooted in the ideology that the welfare of a group is more important than
individual well-being.
7) Frederick Taylor popularized the idea of central economic planning in the nineteenth century.
8) The ultimate goal of a market economy is to ensure that the government takes complete
control over the distribution of a nation’s resources.
9) The government makes nearly all economy-related decisions in a market economy.
10) One of the reasons for the decline of central planning was its failure to create economic value
for customers.
11) Central planning led to little economic growth and consistently low standards of living.
12) A centrally planned economy gives individuals access to alternative purchase options.
13) An economic system based on public ownership fosters growth much better than an economy
based on private ownership.
14) The Chinese term “guanxi” means government ownership.
15) In a mixed economy, the government tends to control the economic sectors that are important
for national security.
16) When the assets of a country are owned by the government, there seems to be more incentive
to eliminate waste.
17) As supply and demand change for a good or service, so does its selling price.
18) Interfering with the price mechanism is a violation of a fundamental principle of the market
economy.
19) Both GDP and GNP measure a nation’s income per person.
20) Volunteer work and unpaid household work are included in GNP.
21) Barter is an alternative for buyers who lack money needed to pay for imports.
22) The concept of purchasing power parity (PPP) must be applied to understand the true value
of a currency in its home country.
23) The human development index (HDI) demonstrates that high national income alone
guarantees human progress.
24) Nations with the poorest infrastructures and lowest personal incomes are called developing
countries.
25) One of the key obstacles faced by countries in economic transition is the lack of managerial
expertise.
26) Businesspeople who accept the risks and opportunities involved in creating and operating
new business ventures are called ________.
A) managers
B) supervisors
C) entrepreneurs
D) angel investors
27) In ________ cultures, economic systems tend to provide incentives and rewards for a
person’s private business initiatives.
A) individualist
B) high uncertainty avoidance
C) feminine
D) large power distance
28) The ________ system of a country consists of the structure and processes it uses to allocate
its resources and to conduct its commercial activities.
A) political
B) economic
C) social
D) cultural
29) A ________ economy is a system in which the government owns a nation’s land, factories,
and other economic resources, and schedules nearly all economic activities.
A) mixed
B) market
C) centrally planned
D) laissez-faire
30) Central planning is rooted in the ideology that ________.
A) the welfare of a group is more important than individual well-being
B) individual concerns should be placed above group consensus
C) individual and group concerns are just as important as government concerns
D) privatization will enhance a country’s economic well-being
31) Which of the following statements is true of a centrally planned economy?
A) Individual concerns are as important as the government’s concerns.
B) Consumers determine the prices of products and labor.
C) Factories are privately owned.
D) The government sets the production goals.
32) In most centrally planned economies that failed, ________.
A) market conditions had determined who would produce goods
B) prices of products were seen as a function of supply and demand
C) central planning agencies had specified the production goals
D) central planners had paid attention to efficiency improvement
33) Who among the following popularized the idea of central economic planning in the
nineteenth century?
A) Frederick Taylor
B) Karl Marx
C) Peter Drucker
D) Henry Fayol
34) North Korea practices a policy of self-reliance known as ________.
A) guanxi
B) laissez-faire
C) juche
D) kaizen
35) Which of the following disagrees with the concept of centrally planned economies?
A) At the time of their collapse, standards of living in most centrally planned economies were at
or above those of market economies.
B) Basic necessities were often not provided to citizens in centrally planned economies.
C) Underground economies for goods and services thrived in most centrally planned economies.
D) Prices on the black market were much higher than the official prices set by governments.
36) Which of the following emerged during the failure of centrally planned economic systems?
A) black markets
B) public markets
C) free enterprise system
D) market economies
37) Which of the following is an important factor in forming successful business ventures in
China?
A) following the strategies of western countries for establishing business relationships
B) focusing on establishing tight formal contracts
C) giving high importance to written contracts
D) establishing a trusting relationship before proceeding with business
38) Guanxi, in the Chinese business context, means ________.
A) bribing government officials
B) manufacturing inexpensive products
C) personal relationships
D) preference for communism
39) In which of the following systems is land, factories, and other economic resources equally
split between private and government ownership?
A) market economy
B) black market economy
C) mixed economy
D) centrally planned economy
40) The government maintains control over the banking industry in a country. Which of the
following is most likely true if the country has a mixed economy?
A) Businesses in most economic sectors of the country are privately owned.
B) The government considers banking sector as important to national security.
C) The country has never experienced threats against its long-term stability.
D) The government views banking as more important than manufacturing.
41) France, Germany, and Sweden are examples of ________.
A) centrally planned economies
B) market economies
C) closed economies
D) mixed economies
42) In which of the following economies would manufacturing firms most likely produce
defective products due to low incentives for quality outputs?
A) centrally planned economies
B) market economies
C) closed economies
D) mixed economies
43) The selling of government-owned economic resources to private operators is called
________.
A) price mechanism
B) social stratification
C) privatization
D) guanxi
44) Which of the following is the main goal of privatization?
A) to ensure that the government specifies production goals
B) to increase economic efficiency
C) to increase subsidies to companies
D) to increase government’s control on the market
45) In a market economy, economy-related decisions are determined by the interactions between
________.
A) the government and individuals
B) supply and demand
C) customers and employees
D) large and small businesses
46) Which of the following dictates supply and demand in a market economy?
A) privatization
B) production quotas
C) price mechanism
D) government intervention
47) A market economy is rooted in the belief that ________.
A) all the economic resources should be owned by the government
B) individual concerns should be placed above group concerns
C) every individual’s business goals must be set by the government
D) government concerns matter the most in a country’s economy
48) Assuming insects destroyed most of the coffee crops in key coffee-producing countries
worldwide, which of the following would most likely occur within the coffee market?
A) Coffee prices would increase.
B) Coffee prices would decrease.
C) Demand for coffee would increase.
D) Demand for coffee would decrease.
49) Which of the following countries has a contemporary market economy?
A) France
B) Sweden
C) India
D) United States
50) Several research studies were published lately that documented the health benefits of a
certain grain. Which of the following is the most likely economic result of these findings?
A) Demand for the grain increases.
B) Equilibrium in terms of demand and supply is maintained.
C) The price of the grain decreases.
D) Supply of the grain remains constant.
51) Laissez-faire economics refers to ________.
A) less government interference in commerce and greater individual economic freedom
B) a government-controlled system with less economic freedom at the individual level
C) a centrally planned economic system
D) creating monopolies through government partnership
52) To function smoothly and properly, a market economy requires ________.
A) government partnership
B) the practice of monopoly
C) price flexibility
D) nationalization
53) Supply and demand are dictated by ________.
A) government ownership
B) free enterprise
C) the price mechanism
D) the management’s decisions
54) In a market economy, access to alternative purchase options is known as ________.
A) price-sensitivity
B) economic transition
C) laissez-faire
D) free choice
55) Which of the following statements is most accurate regarding the element of free choice
when market economies are compared with centrally planned economies?
A) Consumers have free choice in both types of economies.
B) Free choice exists in market economies, but choices are restricted in planned economies.
C) Planned economies allow for greater free choice than do market economies.
D) Consumers do not have free choice in either of these economies.
56) When one company alone controls a product’s supply and therefore, its price, it is considered
a(n) ________.
A) oligopsony
B) monopoly
C) duopoly
D) oligopoly
57) Which of the following control inflation through policies regarding taxation and government
spending in a market economy?
A) fiscal policies
B) monetary policies
C) social policies
D) trade policies
58) ________ policies control the currency supply and interest rates in a market economy.
A) Fiscal
B) Economic
C) Monetary
D) Social
59) Which of the following would characterize a nation with high degree of economic freedom?
A) low tariffs
B) strict trade policies
C) government interventions
D) flourishing black markets
60) The ________ approach to national economics calls for less government interference in
commerce and greater individual economic freedom.
A) totalitarian
B) laissez-faire
C) guanxi
D) centrally planned economy
61) Which of the following would most likely characterize a nation with a low degree of
economic freedom?
A) low government intervention
B) protected property rights
C) strict trade policies
D) low tariffs
62) Which of the following terms refers to the broadest measure of economic development of a
country?
A) gross domestic product (GDP)
B) purchasing power parity (PPP)
C) gross national product (GNP)
D) human development index (HDI)
63) ________ is the value of all goods and services produced by the domestic economy over a
one-year period.
A) Gross domestic product (GDP)
B) Human development index (HDI)
C) Gross national product (GNP)
D) Purchasing power parity (PPP)
64) The ________ of a country is its gross national product divided by its population.
A) GNP per capita
B) GDP per capita
C) purchasing power parity
D) purchasing power
65) The relative ability of two countries’ currencies to buy the same basket of goods in those two
countries is called ________.
A) gross national product
B) gross domestic product
C) purchasing power
D) purchasing power parity