C211 OA TEST QUESTIONS WITH VERIFIED CORRECT ANSWERS

view that claims phenomenon of globalization was initially driven by the desire of Western economies to exploit their power through MNE's new view that claims globalization is a long-run historical evolution since the dawn of humanity. Says it is nothing new and that it will always exist evolutionary view that claims globalization is swinging from one extreme to another from time to time pendulum investment in, controlling, and managing value-added activities in other countries foreign direct investment political view hostile to FDI. believes it is an instrument of imperialism and vehicle for exploitation of domestic resources by foreign capitalists and firms radical suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantages by specializing in the production of certain goods and services free market views FDI as having pros and cons and only approving FDI when its benefits outweigh costs pragmatic nationalis what benefits exist to a country receiving FDI? capital inflow, technology spillovers, advanced management know-how, creates jobs what costs exist to a country receiving FDI? loss of sovereignty, adverse effects on competition, net outflow in the capital account The aggregation of importing and exporting that leads to the country-level trade surplus or deficit. balance of trade firms with a _____ degree of resource similarity are likely to have similar competitive actions high a high degree of resource similarity but low market commonality = _______ intensity of rivalry highest little resource similarity but high market commonality = _____ intensity of rivalry lowest mercantilism, absolute advantage and comparative advantage belong to what theory of international trade classical theory of international trade that relies on more realistic product life cycles and first mover advantages modern under free trade, a nation gains by specializing in economic activities in which it has _____advantage absolute focuses on the idea that if a country does not have absolute advantage, they can still choose to specialize in the production of one good where it has ______ advantage comparative comparative advantage and absolute advantage stem from factor endowments theory that the wealth of the world is fixed and that a nation that imports more and exports less will be richer mercantilism stage of the product life cycle where production of a new product that commands a price premium will concentrate in the US new stage of the product life cycle where demand and ability to produce grow in other developed nations maturing stage of the product life cycle where the previously new product is commoditized and production will now move to low-cost developing nations standardized comparative advantage may change over time because patterns of ______ change over time trade theory that suggests that intervention by governments in certain industries can enhance their odds for international success strategic trade if a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most effective way to do this? currency hedging exchange rate risk associating with the time delay between entering a contract and settling it transaction risk forward transaction that protects traders and investors from exposure to fluctuations of the spot rate hedging a means of spreading out activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions strategic heding amount of resources committed to entering a foreign market scale of entry how do institutions reduce uncertainty? by signaling which conduct is legit and which is not pillar of formal institution, coercive power of government regulatory pillar of informal institution, the mechanism through which norms influence individual and firm behavior normative pillar of informal institution, taken for granted values and beliefs that guide behavior cognitive institutions represented by laws, regulations and rules formal institutions represented by norms, culture and ethics informal the necessity of making rational decisions in the absence of complete information bounded rationality bounded rationality is a position in which view of global business institution political system that affects global business with an individuals right to freedom of expression and organization democracy political system that affects global business with hostility towards business, higher political risk such as nationalism totalitarianism political system where citizens elect representatives to govern the country on their behalf democracy political system where one person or party exercises absolute political control over the population totalitarianism law that uses comprehensive statutes and codes as a primary means to form legal judgements civil law that is shaped by precedents and traditions from previous judicial decisions common law that is based on religious teachings theocratic less confrontational, shorter, less specific form of law civil common law is ______ flexible than civil law more the legal right to use an economic resource and to derive income and benefits from it property right legal rights awarded by government authorities to investors of new products or processes who are given monopoly rights to derive income from inventions patent exclusive legal rights of authors and publishers to publish and disseminate their work copyright exclusive legal rights of firms to use specific names, brands and designs to differentiate their products trademark characterized by the invisible hand of market forces where the government takes a hands off approach market factors of production should be government owned or state owned and all supply, demand and pricing are planned by the government command the economic system of most countries mixed economy a curve that represents a consumers preferences indifference curve ________ indifference curves are preferred to ______ ones higher, lower indifference curves are bowed ______ inward the rate at which a consumer is willing to substitute one good for another marginal rate of substitution the limit on consumption bundles that a consumer can afford budget constraint a piece of analysis that shows the combination of goods the consumer can afford given their income and price of goods budget constraint an increase in income will shift the budget constraint ________ outward the slope of the indifference curve equals the slope of the budget constraint the consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price the increase in total cost that results from adding an additional unit of production marginal cost formula to calculate marginal cost change in total cost / change in quantity a firm will produce the quantity where MR = MC as long as ________ price AVC when price falls below the AVC, what will a firm do? shut down temporarily someone who has to take the market price of a product and accept it as their own price price taker the demand curve for a perfectly competitive firm is horizontal the demand curve for a monopolistic market is downward sloping where do firms with market power determine the quantity of product/service they will produce? quantity where MR = MC, quantity where P = MC where will firms with price setting capacity maximize profits? intersection between the marginal cost curve and the marginal revenue curve a market with only a few sellers offering similar or identical products oligopoly a firm is a sole seller of a product with no close substitutes monopoly many firms sell similar products but not identical. many firms compete for the same customers, free entry and exit monopolistic competition many buyers and sellers, identical products, free entry and exit, perfect information, price taker perfectly competitive what may rare, precious, and hard-to-duplicate resources and capabilities lead to for a firm? sustained comparative advantage company strategies must consider actions by rival firms is a lesson learned from what prisoners dilemma about oligopoly what prevents oligopolistic firms from behaving like monopolies? antitrust laws oligopolies are best off when producing a ______ quantity of output and charging a price ______ marginal cost small, above decrease in income _______ demand for normal goods decreases decrease in income ______ demand for inferior goods increases increase in income _____ demand for inferior goods decreases increase in income ______ demand for normal goods increases