MAN 3600 Exam 2 review Questions
and All Correct Answers 2025-2026
Edition.
Realities of Doing Business in Russia - Answer - high rate of piracy in software, music, DVDs,
and other goods
- anti-piracy laws and law enforcement are weak
- obtaining business licenses requires bribing officials
- SMEs may expend 1/5 of their net income on bribes
Country Risk - Answer exposure to potential loss or adverse effects on company operations
and profitability caused by developments in a country's political and/or legal environments
~ also known as "political risk" (used interchangeably)
-- each country has unique political and legal systems that often pose challenges for company
performance
Dimensions of Country Risk - Answer - harmful or unstable political system
- laws and regulations unfavorable to foreign firms
- inadequate or underdeveloped legal system
- bureaucracy and red tape
- corruption and other ethical blunders
- government intervention, protectionism, and barriers to trade/investment
- mismanagement or failure of the nation
Two Types of Country Risk - Answer *systematic country risk* affects all industries, all firms in
a country
EX: the civil war that occurred in the former Yugoslavia and several African countries in the
1990s impacted all firms
*unsystematic country risk* affects only a subset of firms
EX: the Russian government targeted only Yukos with politically motivated persecution, despite
competitors in the Russian oil industry -- Conoco-Phillips, Exxon Mobil, and Royal Dutch Shell
,legislative bodies
lobbying groups
trade unions
other political institutions
*legal system*
laws, regulations, and rules that aim to:
- ensure order in commercial activities
- resolve disputes
- protect intellectual property
- tax economic output
Political Systems - Answer *political system*: a set of formal institutions that constitute a
government
- it includes legislative bodies, political parties, lobbying groups and trade unions
- the system also defines how these groups interact with each other
3 major types of political systems:
~ totalitarian
~ socialism
~ democracy
these categories are not mutually exclusive
Legal Systems - Answer *legal system*: a system for interpreting and enforcing laws
- it incorporates institutions and procedures for ensuring order and resolving disputes in
commercial activities
4 major types of legal systems:
~ common law
~ civil law
~ religious law
, - ensure stability based on laws
- govern the allocation of valued resources among the members of a society
- define how society's members interact with each other
Political Systems: *Totalitarianism* - Answer government controls all economic and political
matters
- either theocratic (religion-based) or secular
- led by a *dictator*
- sustained via secret police, propaganda, regulation of free discussion and criticism
EX: some countries in the Middle East and Africa; Cuba, North Korea
ex-totalitarian states tend to have much government intervention and bureaucracy
Political Systems: *Socialism* - Answer capital is vested in the state and used primarily as a
means of production for use rather than for profit
- *group welfare* outweighs individual welfare
- government's role is to control the basic means of production, distribution, and commercial
activity
- socialism occurs often as social democracy
- *corporate income tax rates are higher*
EX: Western Europe, Brazil, India
EX: China's land ownership
Political Systems: *Democracy* - Answer economic activity occurs freely, as per market forces
- *limited government*: the government performs only essential functions that serve all
citizens, such as a national defense, maintaining law and order, foreign relations, and providing
basic infrastructure
- *private property rights*: the ability to own property and assets and to increase one's asset
base by accumulating private wealth (property includes land, buildings, stocks, contracts,
patents)
- encourages initiative, ambition, innovation
and All Correct Answers 2025-2026
Edition.
Realities of Doing Business in Russia - Answer - high rate of piracy in software, music, DVDs,
and other goods
- anti-piracy laws and law enforcement are weak
- obtaining business licenses requires bribing officials
- SMEs may expend 1/5 of their net income on bribes
Country Risk - Answer exposure to potential loss or adverse effects on company operations
and profitability caused by developments in a country's political and/or legal environments
~ also known as "political risk" (used interchangeably)
-- each country has unique political and legal systems that often pose challenges for company
performance
Dimensions of Country Risk - Answer - harmful or unstable political system
- laws and regulations unfavorable to foreign firms
- inadequate or underdeveloped legal system
- bureaucracy and red tape
- corruption and other ethical blunders
- government intervention, protectionism, and barriers to trade/investment
- mismanagement or failure of the nation
Two Types of Country Risk - Answer *systematic country risk* affects all industries, all firms in
a country
EX: the civil war that occurred in the former Yugoslavia and several African countries in the
1990s impacted all firms
*unsystematic country risk* affects only a subset of firms
EX: the Russian government targeted only Yukos with politically motivated persecution, despite
competitors in the Russian oil industry -- Conoco-Phillips, Exxon Mobil, and Royal Dutch Shell
,legislative bodies
lobbying groups
trade unions
other political institutions
*legal system*
laws, regulations, and rules that aim to:
- ensure order in commercial activities
- resolve disputes
- protect intellectual property
- tax economic output
Political Systems - Answer *political system*: a set of formal institutions that constitute a
government
- it includes legislative bodies, political parties, lobbying groups and trade unions
- the system also defines how these groups interact with each other
3 major types of political systems:
~ totalitarian
~ socialism
~ democracy
these categories are not mutually exclusive
Legal Systems - Answer *legal system*: a system for interpreting and enforcing laws
- it incorporates institutions and procedures for ensuring order and resolving disputes in
commercial activities
4 major types of legal systems:
~ common law
~ civil law
~ religious law
, - ensure stability based on laws
- govern the allocation of valued resources among the members of a society
- define how society's members interact with each other
Political Systems: *Totalitarianism* - Answer government controls all economic and political
matters
- either theocratic (religion-based) or secular
- led by a *dictator*
- sustained via secret police, propaganda, regulation of free discussion and criticism
EX: some countries in the Middle East and Africa; Cuba, North Korea
ex-totalitarian states tend to have much government intervention and bureaucracy
Political Systems: *Socialism* - Answer capital is vested in the state and used primarily as a
means of production for use rather than for profit
- *group welfare* outweighs individual welfare
- government's role is to control the basic means of production, distribution, and commercial
activity
- socialism occurs often as social democracy
- *corporate income tax rates are higher*
EX: Western Europe, Brazil, India
EX: China's land ownership
Political Systems: *Democracy* - Answer economic activity occurs freely, as per market forces
- *limited government*: the government performs only essential functions that serve all
citizens, such as a national defense, maintaining law and order, foreign relations, and providing
basic infrastructure
- *private property rights*: the ability to own property and assets and to increase one's asset
base by accumulating private wealth (property includes land, buildings, stocks, contracts,
patents)
- encourages initiative, ambition, innovation
