WGU C211 EXAM STUDY GUIDE QUESTIONS FULLY SOLVED WITH ALL ANSWERS VERIFIED FOR ACCURACY

Deadweight Cost Net losses that occurs in an economy as a result of tariffs Purchasing Power Parity (PPP) A conversion that determines the equivalent amount of goods and services different currencies can purchase. An adjustment to reflect the differences in the cost of living in various countries Triad North America, Western Europe, and Japan Resource Based View An organization's resources and capabilities, NOT external conditions, should be the basis for strategic decisions Institution Based View Success and failure are enabled and contained by institutions Open Market Operations (OMO) When the central bank buys or sells bonds Primary Political Views on FDI Free Market and Pragmatic Nationalism How do firms create value when engaging rivals? 1) Launch products in multiple markets 2) Secure patents on key products 3) Hold a dominant position in key markets Globalization can be viewed as: 1) A pendulum that swings from one extreme to another from time to time 2) A new force sweeping through the world in recent times 3) A long run historical evolution since the dawn of human history Non tariff Trade Barrier (NTB) Subsidies, import quotas, export restraints, local content requirement, administrative policies and antidumping duties Free Trade The idea that market forces should determine how much to trade with little or no government intervention Political Arguments for Free Trade 1) National Security 2) Environment and Social Responsibility 3) Consumer Protection Who advocated for Comparative Advantage? David Ricardo Mercantilism Views international trade as a zero sum game Modern Theories of International Trade 1) Product Life Cycle 2) Strategic Trade 3) National Competitive Advantage of Industries Classical Theories of International Trade 1) Mercantilism 2) Absolute Advantage 3) Comparative Advantage Modern Theory vs Classical Theory Modern = Dynamic Classical = Static Critical features of Product Life Cycle 1) New 2) Maturing 3) Standardized Political Views on Foreign Direct Investment (FDI) 1) Radical 2) Free Market 3) Pragmatic Nationalism Benefits of a country receiving FDI 1) Capital inflow 2) Technology Spillover 3) Advance Management Know-How 4) Job Creation Costs to a country receiving FDI 1) Loss of Sovereignty 2) Adverse effects on competition 3) Capital Outflow Hedging A transaction that protects traders and investors from exposure to the fluctuations of the spot rate Advantages with First Mover 1) Proprietary 2) Technological Leadership 3) Preemption of scarce resources 4) Establishment of entry barriers 5) Avoidance of clash with dominant firms at home 6) Relationships with key stakeholders Advantages with Late Mover 1) Opportunity to free ride on first mover investments 2) Resolution of technological and market uncertainty What are the three pillars 1) Regulatory 2) Normative 3) Cognitive Regulatory Pillar The coercive power of governments (regulations, laws, rules) Normative Pillar Values, beliefs, and actions of relevant players (norms, ethics and cultures) Cognitive Pillar The internalized taken for granted values and beliefs that guide behavior (beliefs between right/wrong) Formal Institution One that includes laws, regulations and rules Informal Institution One that includes norms, cultures and ethics Civil Law Law that uses comprehensive statues and codes as a primary means to form legal judgments Common Law Law shaped by precedents and traditions from previous judicial decisions Theocratic Law A legal system based on religious teachings Property Right The legal rights to use an economic resource and to derive income and benefits from it Intellectual Property Right Rights associated with ownership. Patents, copyrights and trademarks. Indifference Curve Curve that shows consumption bundles that give the consumer the same level of satisfaction Properties of an Indifference Curve 1) Higher indifference curves are preferred to lower ones 2) Indifference curves are downward sloping 3) Indifference curves do not cross 4) Indifference curves are bowed inward Marginal Rate of Substitution The rate at which the consumer is willing to trade off one good for the other Budget Constraint Consumption bundles that the consumer can afford Marginal Cost The increase of the total cost that arises from an extra unit of production Relation of marginal cost and total cost The portion of the total cost resulting from an extra unit of production Formula for Marginal Cost Change in total cost divided by change in quantity What are the two types of Total Cost? Fixed and Variable Oligopoly Industry dominated by a small number of players Open Market Operations The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Discount Rate The interest rate banks pay when borrowing from the Federal Reserve Reserve Ratio The fraction of total deposits that a bank holds as reserves Normal Good Good for which an increase in income leads to an increase in demand Inferior Good Good for which an increase in income leads to a decrease in demand Factors that influence the position of the demand curve 1) Price of the good itself 2) Income 3) Price of related goods 4) Tastes 5) Expectations 6) Number of Buyers Tariff Tax on goods produced abroad and sold domestically - method used to restrict international trade Dead Weight Loss Fall in total surplus that results from a market distortion such as a tax Consumer Surplus The difference between the amount a buyer is willing to pay for a good or service and the total amount they actually pay Producer Surplus The difference between what producers are willing and able to supply a good for and the price they actually receive. Macroeconomics The study of the economy-wide phenomena, including inflation, unemployment, and economic growth Microeconomics The study of how households and firms make decisions and how they interact in markets Gross Domestic Product (GDP) The monetary measure of the market value of all final goods and services produced in a period of time Four components of GDP 1) Consumption 2) Investment 3) Government Purchases 4) Net exports