C211 WGU Pre-Assessment, C211 Study Guide, 1. WGU C211 Globalization (peng 1,5,6,11), C211 International Trade and Foreign Exchange Markets, WGU c211 Political and Economic Forces with 100% correct answers(verified for accuracy)

Which view claims that the phenomenon of globalization was initially driven by the desire of western economies to exploit their power through multinational enterprises? the new-force view Economic gains come from international trade because one country's exported goods, services, or other items are unique, valuable, and difficult to duplicate to the importing countries? Which view does this statement portray? Resource-based view What is the aggregation of importing and exporting that leads to the country-level trade surplus or deficit? balance of trade What is a cost of foreign direct investment? developing countries may be exploited by multinational enterprises What may precious, rare, and hard-to-duplicate resources and capabilities lead to for a firm? sustained comparative advantage Which theory states that patterns of international trade change across new, maturing, and standardized stages? Product life cycle theory What is the financial environment in which exchange rates and payments for goods and services are conducted? International monetary system What happens to a country's real exchange rate and nominal interest rate as the price level increases, assuming all other factors are unchanged? Exchange rates depreciate; interest rates increase What is the easiest method nonfinancial companies use to handle currency fluctuations? currency diversification Which strategy minimizes the risk of unanticipated changes in future exchange rates currency swap A company is looking for a location with an abundance of ground-breaking individuals, firms, and universities. Which type of strategic goal is this company demonstrating? innovation-seeking What advantage comes with not sharing benefits with late entrants? First-mover advantage Which entry mode is a non-equity agreement for a company contemplating entry into a foreign market? Licensing What size commitment is required for a non-equity mode of entry into a foreign market? Small commitment What are two supportive pillars for an informal institution cognitive; normative what is the key role of an institution, according to the institution-based view? To reduce uncertainty What are the rules, enforcement mechanisms, and organizations that support market transactions? institutions What is a core proposition underpinning an institutional-based view of global business bounded rationality In which type of political system do citizens elect representative to govern the country on their behalf? democracy Which legal system uses comprehensive lists of rules and written codes civil law what are the legal privileges associated with the use of economic property to obtain income and other benefits from its use property rights what is the purpose of having property rights and intellectual property rights? to legally protect the use of tangible and intangible property and allow its lawful owner to derive income and other benefits from it what are the two polar types of economies centrally planned; market in addition to encouraging efficiency, why might a government intervene in a market? To promote equality What is the relationship between total and marginal cost marginal cost is the change in total cost divided by the change in quantity A farmer sells wheat in a perfectly competitive market. Which action should the farmer take to maximize profits? Produce the quantity where the price equals the farmers marginal cost what is the economic profit of a competitive firm the difference between total revenue and total cost Which condition applies when a competitive firm decides to temporarily shut down? average variable costs are above the price what is the producers demand curve if the producer sells a differentiated product downward sloping Which statement describes a competitive firms demand curve it is more elastic than a monopolys demand curve what is the point at which a monopoly maximizes profit where marginal cost equals marginal revenue what is a characteristic of monopolistic competition many firms and differentiated products What is a likely outcome of the standard prisoners dilemma game both prisoners confess How does the prisoners dilemma help in understanding company behavior in an oligopoly company strategies must consider actions by rival firms What do economists use to represent a consumers preferences indifference curves what can be assumed that the consumer will buy if it is observed that the consumers budget constraint has shifted inward fewer normal goods; more inferior goods what will happen to the market price and quantity in the short run if there is an increase in market demand in a perfectly competitive market the equilibrium price will increase; equilibrium quantity will increase What will happen to equilibrium quantity and price if both demand and supply decrease? Quantity will decrease; price can either increase or decrease What happens to demand quantity for normal goods as percentage change in income increases demand increases what do the positive and negative numbers of cross-price elasticity of demand represent substitutes or complements what is one way the federal reserve influences the reserve ratio by altering reserve requirements which fiscal policy would be most effective at raising consumer spending and expanding aggregate demande enacting a permanent income tax cut what is the effect of an increase in the money supply in the short run interest rates decrease; aggregate demand for goods and services increase how is consumer surplus represented on a graph area below the demand curve and above price which two statements define producer surplus the amount the seller is paid minus the cost of production; the area below the price and above the supply curve on a graph A painter spends $200 on paint. He then bills the homeowner $1,000 to cover his time and his expenses. What is the amount of these transactions that is added to gross domestic product? $1,000 A U.S. State purchases a fleet of new highway patrol vehicles manufactured in Japan. Which two statements correctly describe how the components of U.S. gross domestic product are affected? net exports decrease; government expenditures increase A nation ends a tariff on bananas, which is an imported product. What will be the effect on banana prices within that nation? The price will match the global market price What effect does implementing a new tariff have on the government that implements it tax revenue increases "New" view on globalization A force sweeping through the world in recent times. Evolutionary view of globalization A long-run historical evolution since the dawn of human history "Pendulum" view on globalization One that swings from one extreme to another from time to time What is Foreign Direct Investment (FDI)? direct, hands on management of foreign assets; equity stake of 10% or more on foreign assets What different political views exist on FDI? Radical, Free Market, and Pragmatic Radical view on FDI A political view that sees FDI as an instrument of imperialism and a vehicle for foreign exploitation. Free Market view on FDI A political view that suggests that FDI unrestricted by government intervention is the best. Pragmatic View on FDI A political view that suggests FDI has both pros and cons; FDI is approved when benefits outweigh costs What benefits exist to a country receiving FDI? Capital inflow, technology, management, job creation What costs exist to country receiving FDI? loss of sovereignty, local competition, capital outflow resource similarity The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. classical theory of international trade consists of mercantilism, absolute advantage, comparative advantage, and factor endowment theory modern theory of international trade consists of product life cycle, strategic trade, and national competitive advantage absolute advantage The economic advantage one nation enjoys that is absolutely superior to other nations; specializes in production of goods for which has an absolute advantage, both can produce/benefit more : win-win comparative advantage the ability to produce a good at a lower opportunity cost than another producer Mercantilism viewed international trade as a zero-sum game; belief that the wealth of the world is fixed; belief that a nation who exported more and imported less would be richer; self-sufficient What are the critical features of the Product Life Cycle? Views 3 categories of the world: lead innovative nation, other developed nations, developing nations Views 3 life cycles of products: new (production/exportation0, maturing (demand/ability to produce), standardized (commoditized) Strategic trade strategic intervention by governments in certain industries can enhance their odds for international success; highly capital intensive, high entry barrier industries where domestic firms may have little chance without government assistance would benefit most Which theory came first, mercantilism or modern day protectionism? mercantilism transaction risk risk that a change in exchange rates may occur between the invoicing date and the settlement date of the transaction currency hedging A transaction that protects traders and investors from exposure to the fluctuations of the spot rate. Strategic hedging Spreading out activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions. what advantages exist with first mover? benefits that accrue to firms that enter the market first and that later entrants do not enjoy What advantages exist with late mover benefits that accrue to firms that enter the market later and that first entrants do not get to enjoy How is scale-of-entry related or relevant in foreign market entries? the amount of resources committed to entering a foreign market How do institutions reduce uncertainty? institutions constrain the range of acceptable actions Regulatory pillar formal institution; coercive power of governments; laws, regulations, rules; written laws normative pillar informal institution; values, beliefs, and actions of a group; emotions cognitive pillar informal institution; internalized values and beliefs that guide behavior; culture and ethics; logic Compare formal and informal institutions. one has written rules/laws and the other is guides behavior On what is the institution based view of global business grounded? What core propositions lie at the root of this view? Managers and firms make the best decisions in the absence of complete information; bounded reality. Informal constraints play a larger role play a larger role in reducing uncertainty.