Busa Chpt. 6

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Chpt
Chapter 6 Political and Legal Systems in National Environments

MULTIPLE-CHOICE QUESTIONS
For each of the following choose the answer that most completely answers the question.

WHAT IS COUNTRY RISK?

1. What is the primary reason that some firms decide to enter foreign markets through FDI instead of exporting? a. government-imposed import tariffs
b. legal systems which prohibit imports
c. extensive customs bureaucracy
d. competition among exporters
(a; p. 160; concept; Learning Objective 1; moderate)

2. All of the following are ways that firms can benefit from a foreign market’s political and legal systems except ________. a. tax holidays
b. subsidies
c. legal protection
d. cash incentives
(c; p. 160; concept; Learning Objective 1; moderate)

3. A company’s potential loss of profitability caused by a nation’s political or legal setting is known by which of the following terms? a. commercial risk
b. currency risk
c. cross-cultural risk
d. country risk
(d; p. 160; concept; Learning Objective 1; moderate)

4. Each of the following could be considered intellectual property except ________. a. stock
b. trademark
c. TV script
d. invention
(a; p. 161; concept; Learning Objective 1; easy)

5. Which of the following situations would raise country risk the most? a. inflation
b. civil war
c. elections
d. stock market
(b; pp. 162-163; concept; Learning Objective 1; moderate)

6. Which of the following helps explain why India was once characterized by high country risk? a. Taxes and financial incentives benefit Indian businesses over foreign firms. b. Indian business leaders distrust most European corporations. c. Political leaders enacted laws targeted against foreign firms. d. Indian leaders fear the modern influences of American firms. (c; pp. 162-163; concept; Learning Objective 1; difficult; AACSB: Analytic Skills)

7. Which of the following characterizes country risk?
a. The political and legal systems of adjacent nations greatly impact the country risk of nations that host foreign firms. b. Country risk changes only after the creation of laws and regulations that affect foreign firms. c. A nation’s country risk level remains fairly constant until the election and installation of a new political leader. d. Although country risk never disappears, its intensity fluctuates with political changes and legal happenings. (d; p. 163; concept; Learning Objective 1; difficult; AACSB: Analytic Skills)

THE POLITICAL SYSTEM

8. Which of the following is not a typical principal function of a political system? a. regulate private sector investments
b. establish stability based on laws
c. provide protection from external threats
d. govern the allocation of valued resources
(a; p. 164; concept; Learning Objective 2; moderate)

9. Which of the following countries is considered primarily socialist? a. Germany
b. Canada
c. Venezuela
d. Libya
(c; p. 165; concept; Learning Objective 2; easy)

10. Totalitarian states are characterized by all of the following except ________. a. dictator-led state political party
b. state supported religious ideology
c. state regulated public behavior
d. free flow of information in the mass media
(d; pp. 164-165; concept; Learning Objective 2; moderate)

11. Which of the following is the underlying principle of socialism? a. The welfare of individuals far outweighs the welfare of society. b. The wellbeing of the group supersedes the wellbeing of individuals. c. The rights of individuals should be balanced with societal needs. d. The state should protect itself from individual and group interests. (b; p. 165; concept; Learning Objective 2; difficult

Which form of government is characterized by private property rights and limited government? e. autocratic
f. democratic
g....
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