WGU C211 Global Economics for Managers — Full
Exam with correct answers and rationale graded A+
SECTION 1: INSTITUTIONS & THE GLOBAL BUSINESS ENVIRONMENT (Questions 1–30)
1. The institution-based view of global business emphasizes that:
A. Only formal laws matter for firm strategy
B. Formal and informal rules of the game shape firm strategy and performance
C. Institutions are irrelevant in developed economies
D. Firms operate without constraints
Answer: B
Rationale: The institution-based view holds that formal institutions (laws, regulations) and informal
institutions (norms, cultures, ethics) combine to govern firm behavior and reduce uncertainty in
global markets -2-6.
2. Which of the following is NOT a proposition of the institution-based view?
A. Managers rationally pursue their interests within formal and informal constraints
B. Formal and informal institutions combine to govern firm behavior
C. Informal institutions do not govern firm behavior
D. In situations where formal constraints are unclear, informal constraints play a larger role
Answer: C
Rationale: Informal institutions (norms, values, ethics) DO govern firm behavior. The institution-
based view explicitly recognizes that both formal and informal institutions shape strategic choices -2.
3. The three pillars of institutions are:
A. Formal, Informal, and Regulatory
B. Regulatory, Normative, and Cognitive
C. Political, Economic, and Legal
D. Cultural, Social, and Political
Answer: B
Rationale: The three pillars are the regulatory pillar (formal laws and regulations), the normative
pillar (norms and values), and the cognitive pillar (internalized, taken-for-granted beliefs) -2.
4. Which pillar of institutions refers to the coercive power of governments?
A. Normative pillar
B. Cognitive pillar
C. Regulatory pillar
D. Informal pillar
Answer: C
Rationale: The regulatory pillar consists of formal institutions such as laws, regulations, and political
and legal systems that have coercive power -10.
5. The cognitive pillar refers to:
A. Laws and regulations that govern behavior
,B. The internalized, taken-for-granted values and beliefs that guide behavior
C. The norms and values that society expects
D. The economic systems in place
Answer: B
Rationale: The cognitive pillar represents what individuals believe to be right and wrong—
internalized values and beliefs that guide behavior without external enforcement -2.
6. How do institutions reduce uncertainty in global business?
A. By eliminating all risks
B. By setting the "rules of the game" for competition and international trade
C. By guaranteeing profits
D. By eliminating competition
Answer: B
Rationale: Institutions provide a framework that reduces uncertainty by establishing the rules for
competition and trade, signaling what conduct is legitimate and acceptable -2-11.
7. The main supportive pillars of informal institutions are:
A. Normative and cognitive
B. Cognitive and regulatory
C. Regulatory, normative, and cognitive
D. Regulatory and normative
Answer: A
Rationale: Informal institutions are supported by the normative and cognitive pillars, while formal
institutions are supported by the regulatory pillar -10.
8. A fundamental aspect of which political system is that it provides individuals the right to
freedom of expression and organization?
A. Communist totalitarianism
B. Democracy
C. Right-wing totalitarianism
D. Theocracy
Answer: B
Rationale: Democracy effectively conducts global business by providing individuals the right to
freedom of expression and organization, affecting political stability and policy predictability -10.
9. Which of the following is true of the common law system?
A. It has spread to all English-speaking countries and their former colonies
B. It does not allow interpretations of the law by judges
C. It is the oldest legal system in the world
D. It bases its legal judgment primarily on the dominant religion of the country
Answer: A
Rationale: Common law originated in England and spread to English-speaking countries and their
former colonies. It relies on precedent and judicial interpretation -10.
10. A legal system based on religious teachings is called:
A. Common law
B. Civil law
,C. Theocratic law
D. Socialist law
Answer: C
Rationale: Theocratic law is a legal system based on religious teachings and doctrine. It is most
common in countries where religion plays a dominant role in governance -10.
11. What is the defining characteristic of a market economy?
A. The government owns all factors of production
B. Supply, demand, and pricing are planned by the government
C. Market forces of supply and demand coordinate economic activity
D. A central planning committee determines what goods are produced
Answer: C
Rationale: A market economy relies on decentralized decision-making where prices, supply, and
demand are determined by market forces (the "invisible hand"), not government planning -6.
12. What are the two polar types of economies?
A. Developed and developing economies
B. Centrally planned economies and market economies
C. Mixed economies and traditional economies
D. Capitalist and socialist economies
Answer: B
Rationale: The two polar types are centrally planned economies (government controls all factors of
production) and market economies (market forces coordinate activity) -12.
13. The purpose of property rights and intellectual property rights is to:
A. Increase government revenue
B. Legally protect the use of tangible and intangible property and allow lawful owners to derive
income from it
C. Prevent all forms of competition
D. Eliminate the need for contracts
Answer: B
Rationale: Property rights legally protect the use of tangible and intangible property, allowing
owners to derive income and other benefits from their assets -12.
14. Which of the following is an example of intellectual property? (Choose TWO)
A. Patents
B. Subsidies
C. Trademarks
D. Tariffs
Answer: A and C
Rationale: Patents and trademarks are forms of intellectual property. Patents protect inventions and
processes; trademarks protect brand identifiers such as names and logos. Subsidies and tariffs are
government trade policies, not intellectual property -15.
15. Which political system is characterized by absolute political control delegated to one person or
party?
A. Democracy
, B. Totalitarianism
C. Republic
D. Constitutional monarchy
Answer: B
Rationale: Totalitarianism concentrates absolute political power in the hands of a single individual or
ruling party. Dissent is suppressed, and the state controls political, economic, and social life -15.
16. What are the two core propositions underpinning the institution-based view of global
business?
A. Managers rationally pursue their interests within formal and informal constraints; formal and
informal institutions combine to govern firm behavior
B. Institutions reduce uncertainty; institutions increase transaction costs
C. Formal institutions are more important than informal institutions; informal institutions are more
important than formal institutions
D. Institutions are static; institutions are dynamic
Answer: A
Rationale: The two core propositions are: (1) managers and firms rationally pursue their interests
within formal and informal constraints, and (2) formal and informal institutions combine to govern
firm behavior -2.
17. In which example can the role of the cognitive pillar be identified?
A. A firm being punished for corporate espionage by the courts
B. A firm not being able to sell a product due to prevalent cultural beliefs
C. A firm being exposed after an employee turned whistleblower
D. A firm outsourcing its jobs
Answer: B
Rationale: The cognitive pillar involves internalized, taken-for-granted beliefs and values. A firm
unable to sell a product due to cultural beliefs is experiencing the cognitive pillar's influence -10.
18. Which of the following is a characteristic of a democracy?
A. Power is concentrated in a single ruler
B. Citizens have the right to participate in political decisions
C. The government controls all factors of production
D. There is no freedom of speech
Answer: B
Rationale: In a democracy, citizens participate in political decisions through voting and other forms
of political engagement -2.
19. The institutional framework is composed of which two types of systems?
A. Personal and Firm
B. Formal and Informal
C. Cognitive and Normative
D. Political and Economic
Answer: B
Rationale: The institutional framework is composed of formal institutions (laws, regulations) and
informal institutions (norms, culture, ethics) -6.
Exam with correct answers and rationale graded A+
SECTION 1: INSTITUTIONS & THE GLOBAL BUSINESS ENVIRONMENT (Questions 1–30)
1. The institution-based view of global business emphasizes that:
A. Only formal laws matter for firm strategy
B. Formal and informal rules of the game shape firm strategy and performance
C. Institutions are irrelevant in developed economies
D. Firms operate without constraints
Answer: B
Rationale: The institution-based view holds that formal institutions (laws, regulations) and informal
institutions (norms, cultures, ethics) combine to govern firm behavior and reduce uncertainty in
global markets -2-6.
2. Which of the following is NOT a proposition of the institution-based view?
A. Managers rationally pursue their interests within formal and informal constraints
B. Formal and informal institutions combine to govern firm behavior
C. Informal institutions do not govern firm behavior
D. In situations where formal constraints are unclear, informal constraints play a larger role
Answer: C
Rationale: Informal institutions (norms, values, ethics) DO govern firm behavior. The institution-
based view explicitly recognizes that both formal and informal institutions shape strategic choices -2.
3. The three pillars of institutions are:
A. Formal, Informal, and Regulatory
B. Regulatory, Normative, and Cognitive
C. Political, Economic, and Legal
D. Cultural, Social, and Political
Answer: B
Rationale: The three pillars are the regulatory pillar (formal laws and regulations), the normative
pillar (norms and values), and the cognitive pillar (internalized, taken-for-granted beliefs) -2.
4. Which pillar of institutions refers to the coercive power of governments?
A. Normative pillar
B. Cognitive pillar
C. Regulatory pillar
D. Informal pillar
Answer: C
Rationale: The regulatory pillar consists of formal institutions such as laws, regulations, and political
and legal systems that have coercive power -10.
5. The cognitive pillar refers to:
A. Laws and regulations that govern behavior
,B. The internalized, taken-for-granted values and beliefs that guide behavior
C. The norms and values that society expects
D. The economic systems in place
Answer: B
Rationale: The cognitive pillar represents what individuals believe to be right and wrong—
internalized values and beliefs that guide behavior without external enforcement -2.
6. How do institutions reduce uncertainty in global business?
A. By eliminating all risks
B. By setting the "rules of the game" for competition and international trade
C. By guaranteeing profits
D. By eliminating competition
Answer: B
Rationale: Institutions provide a framework that reduces uncertainty by establishing the rules for
competition and trade, signaling what conduct is legitimate and acceptable -2-11.
7. The main supportive pillars of informal institutions are:
A. Normative and cognitive
B. Cognitive and regulatory
C. Regulatory, normative, and cognitive
D. Regulatory and normative
Answer: A
Rationale: Informal institutions are supported by the normative and cognitive pillars, while formal
institutions are supported by the regulatory pillar -10.
8. A fundamental aspect of which political system is that it provides individuals the right to
freedom of expression and organization?
A. Communist totalitarianism
B. Democracy
C. Right-wing totalitarianism
D. Theocracy
Answer: B
Rationale: Democracy effectively conducts global business by providing individuals the right to
freedom of expression and organization, affecting political stability and policy predictability -10.
9. Which of the following is true of the common law system?
A. It has spread to all English-speaking countries and their former colonies
B. It does not allow interpretations of the law by judges
C. It is the oldest legal system in the world
D. It bases its legal judgment primarily on the dominant religion of the country
Answer: A
Rationale: Common law originated in England and spread to English-speaking countries and their
former colonies. It relies on precedent and judicial interpretation -10.
10. A legal system based on religious teachings is called:
A. Common law
B. Civil law
,C. Theocratic law
D. Socialist law
Answer: C
Rationale: Theocratic law is a legal system based on religious teachings and doctrine. It is most
common in countries where religion plays a dominant role in governance -10.
11. What is the defining characteristic of a market economy?
A. The government owns all factors of production
B. Supply, demand, and pricing are planned by the government
C. Market forces of supply and demand coordinate economic activity
D. A central planning committee determines what goods are produced
Answer: C
Rationale: A market economy relies on decentralized decision-making where prices, supply, and
demand are determined by market forces (the "invisible hand"), not government planning -6.
12. What are the two polar types of economies?
A. Developed and developing economies
B. Centrally planned economies and market economies
C. Mixed economies and traditional economies
D. Capitalist and socialist economies
Answer: B
Rationale: The two polar types are centrally planned economies (government controls all factors of
production) and market economies (market forces coordinate activity) -12.
13. The purpose of property rights and intellectual property rights is to:
A. Increase government revenue
B. Legally protect the use of tangible and intangible property and allow lawful owners to derive
income from it
C. Prevent all forms of competition
D. Eliminate the need for contracts
Answer: B
Rationale: Property rights legally protect the use of tangible and intangible property, allowing
owners to derive income and other benefits from their assets -12.
14. Which of the following is an example of intellectual property? (Choose TWO)
A. Patents
B. Subsidies
C. Trademarks
D. Tariffs
Answer: A and C
Rationale: Patents and trademarks are forms of intellectual property. Patents protect inventions and
processes; trademarks protect brand identifiers such as names and logos. Subsidies and tariffs are
government trade policies, not intellectual property -15.
15. Which political system is characterized by absolute political control delegated to one person or
party?
A. Democracy
, B. Totalitarianism
C. Republic
D. Constitutional monarchy
Answer: B
Rationale: Totalitarianism concentrates absolute political power in the hands of a single individual or
ruling party. Dissent is suppressed, and the state controls political, economic, and social life -15.
16. What are the two core propositions underpinning the institution-based view of global
business?
A. Managers rationally pursue their interests within formal and informal constraints; formal and
informal institutions combine to govern firm behavior
B. Institutions reduce uncertainty; institutions increase transaction costs
C. Formal institutions are more important than informal institutions; informal institutions are more
important than formal institutions
D. Institutions are static; institutions are dynamic
Answer: A
Rationale: The two core propositions are: (1) managers and firms rationally pursue their interests
within formal and informal constraints, and (2) formal and informal institutions combine to govern
firm behavior -2.
17. In which example can the role of the cognitive pillar be identified?
A. A firm being punished for corporate espionage by the courts
B. A firm not being able to sell a product due to prevalent cultural beliefs
C. A firm being exposed after an employee turned whistleblower
D. A firm outsourcing its jobs
Answer: B
Rationale: The cognitive pillar involves internalized, taken-for-granted beliefs and values. A firm
unable to sell a product due to cultural beliefs is experiencing the cognitive pillar's influence -10.
18. Which of the following is a characteristic of a democracy?
A. Power is concentrated in a single ruler
B. Citizens have the right to participate in political decisions
C. The government controls all factors of production
D. There is no freedom of speech
Answer: B
Rationale: In a democracy, citizens participate in political decisions through voting and other forms
of political engagement -2.
19. The institutional framework is composed of which two types of systems?
A. Personal and Firm
B. Formal and Informal
C. Cognitive and Normative
D. Political and Economic
Answer: B
Rationale: The institutional framework is composed of formal institutions (laws, regulations) and
informal institutions (norms, culture, ethics) -6.
