978-0077606121 Chapter 6 Answers to Questions

Type

Quiz

Book Title

International Business: The Challenge of Global Competition 13th Edition

ISBN 13

978-0077606121

April 7, 2019

Chapter 06 - Political and Trade Forces

XI. End of Chapter Questions

1. Why might governments nationalize firms, and why might a government-owned firm have an

unfair advantage over privately owned companies?

Governments put their hands on firms for a number of reasons. Some of these reasons are (1) to

extract more money from the firms, if the government suspects that the firms are concealing profits;

(2) profitability—the government believes it can run the firms more efficiently and make more money;

2. What options does a company have for helping to prevent terrorism or to better manage

terrorist actions if they occur?

Companies or their executives can purchase insurance to cover ransom payments, attend

antiterrorist schools, and hire companies to handle negotiations with kidnappers. The insurance, which

is called KRE (kidnap, ransom, and extortion), can pay for the ransom, the fees of specialist

3. Why might business fear sudden changes in government policies?

Business is regulated by governments of all countries where it is not owned by government.

4. How can ICs use their strengths to influence government policies?

International companies are not without political clout. When considering investments in a country

5. Is country risk assessment an exact science? Explain.

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Chapter 06 - Political and Trade Forces

6. It seems that free, unrestricted international trade, in which each nation produces and

exports products for which it has a comparative advantage, will enable everyone to have a higher

level of living. Why, then, does every country have import duty restrictions?

Trade restrictions are imposed at the request of special interest groups, not the public. These

groups may include labor unions and local communities fighting to keep a plant open to avoid losing

7. “We certainly need defense industries, and we must protect them from import competition

by placing restrictions on competitive imports.” True or false? Is there an alternative to trade

restrictions that might make more economic sense?

Unfortunately, we live in a world where military preparedness is necessary, but the problem is

8. It seems entirely reasonable for a government to undertake efforts to protect a new or recently

established – often called “infant” – industry. Why, then, might international trade professionals

argue against governmental efforts to protect a new or recently established industry?

It is difficult to identify whether an industry can be economically viable over the long term, even

if protection is offered to it, raising the prospect that many sectors could receive assistance even

9. According to the WTO, what is dumping? Why would a government be opposed to having

their citizens or businesses be able to obtain products at lower costs?

The WTO defines dumping as selling a product abroad for less than (1) the average cost of

production in the exporting nation, (2) the market price in the exporting nation, or (3) the price to third

10. “Workers are paid $20 an hour in the United States but only $4 in Taiwan. Of course we

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Chapter 06 - Political and Trade Forces

can’t compete. We need to protect our jobs from cheap foreign labor.” What are some possible

problems with this statement?

Wage costs are only a fraction of labor costs, costs that are only part of the overall cost of

11. There are two general classifications of import duties: tariff and nontariff barriers.

a. Describe the various types of tariff barriers.

b. What are some of the nontariff barriers?

(a.) A tariff is a tax on imports. Examples of tariff barriers include: ad valorem, specific and

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