List of Exam Questions on Global Economic Environments

List of Exam Questions
First Exam Global Economic Environments
CHAPTER 4, 5, 8, 13 Readings PLUS Pages75-85

ESSAYS

1) Describe the product cycle, including addressing the various inputs that are required over time and the resulting production location decisions.

Early stage-skilled marketing, new design, feedback from customer, scientific and engineering input in design and manufacturing, capital a high-income market (developed country)
Middle stage-incremental improvements to standardized products in size, feature, and manufacturing, low-skilled and semiskilled in assembly-type operation, countries with lower labor costs
Late stage-high-income nations begin to exceed producing, unskilled and semiskilled labor to keep labor cost low, moving to developing countries, high-income countries turn to new cycle

2) What are the factors that have been identified that affect a migration decision? Give examples of each.

Supply-push, disaster or war and demand-pull better employment or higher income
, social network, family or community members make migration process a little easier

3) Describe the two sources of economies of scale and how these economies of scale lead to intra-industry trade.

Internal economies of scale, falling average costs over a relatively large range of output. leads to larger firms because size confers a competitive advantage in the form of lower average costs
External economies of scale, firms more productive as the number of firms in the industry increase, larger market lower average costs at the market level

4) How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States. Are they always beneficial?

Knowledge spillovers that help keep all firms abreast of the latest technology and newest development. Silicon Valley
Create a deep labor market for specialized skills. Entertainment industry in Los Angeles
Lead to a dense network of input suppliers. Silicon Valley

5) Describe how Mexico's development strategy changed from the 1950s to today and how that changed the production location decisions of firms.

Before the financial crisis in 1982, Mexico’s strategy was inward looking by protectionism from foreign competition, companies focus on domestic market, close to final market and reduce costs, near Mexico City or one or two other major urban areas
In the middle of the 1980s, Mexico shifted to a more neutral policy with respect to production for domestic or foreign markets, removing many of the tariffs and other protections, create more room for exports producers, companies concentrate in the northern border that close to the US
After 1994, NAFTA come into effect, migration become more popular

6) Suppose two nations are seeking to expand their commercial relations. What options do they have in terms of addressing conflicts in standards? Describe each and what conditions might favor different approaches to setting standards.

Harmonization of product and process standards, two or more countries share a common set of standards in an area of concern, such as safety, labor, environment, fair competition
Mutual recognition of standards, countries keep their own product and process standards but accept the standards of others as equally valid and sufficient
Separate standards, countries keep their own standards and refuse to recognize those of anyone else
Harmonization in technical standards of product design or performance is useful because it generates larger unified markets
When countries vary in levels of development, it is generally better to mutual recognition, such as labor and environmental legislation or for safety or other reasons, to maintain separate standards

7) Describe the connections between rising income and environmental and social indicators. Which indicators improve and which worsen as national income rises?

Higher income, lower under 5 mortality per 1000 rate, higher percent of population with access to safe drinking water, high co2 emissions,
Lower-middle-income countries are removing forest at the highest rate, while upper-middle-income and low-income countries are depleting their forest reserves at a much lower rate, and high-income countries are increasing their forest reserves

8) What lessons did Mexico's policy makers learn from the 1980s debt crisis? What reforms did President Salinas pursue? What were his main goals?

ISI policy hinders the companies’ ability to export, making it hard to resist financial crisis and pay foreign debt
A free trade agreement with the United States
First, solidify his reforms in an international agreement
Second, attract more foreign capital to increase the low domestic savings in Mexico

9) What type of economic policy did Mexico follow from the end of World War II until the 1980s? Describe the three-stage strategy that supporters of this policy emphasized. What was the outcome of these policies for Mexico's manufacturing sector?

Import substitution industrialization policy
Begin with simple consumer goods: food, beverage, textile, furniture, apparel, footwear
More complex consumer goods: household appliances,
Industrial goods: generators, pumps, conveyors
More sophisticated industrial goods
Prosper internal production, protect companies, discriminate against export, high protectionist walls reduce incentive to innovate and improve products and limit its capacity to export

CASES – From chapters studied and NOT done in class.

SIX STEPS: 1. Define the Problem 2. Determine the Objective 3. Explore the Alternatives 4. Predict the Consequences 5. Make a Choice 6. Perform Sensitivity Analysis

ONE LINERS

OL1) When did NAFTA go into effect?

Jan 1, 1994

OL2) Why are trade agreements between the U.S. and Mexico more controversial than trade agreements between the U.S. and Canada?

Believed to have a negative impact on the US labor market

OL3) What two trends was Canada trying to address in negotiating CUSTA?

Protect cultural industry and erosion of social programs

OL4) In negotiating NAFTA, what two side agreements were reached?

North American Agreement on Labor Cooperation
North American Agreement on Environmental Cooperation

OL5) What is the main problem with rules of origin?

Increased number of preferential trading agreements

OL6) How is offshoring of services different from past trade patterns?

Historically, most services have been consumed at the point of production, but recently it’s possible to relocate some service production abroad

OL7) Offshoring required which types of advances?

Modern communication and transportation technologies, information technologies, telecommunications

OL8) What does research thus far suggest about job loss and offshoring?

Off-shoring has a variety of possible patterns that can result in an expansion or a contraction of jobs

OL9) Forces inside a nation that cause people to think about leaving that nation are called what in migration theory?

Supply-push factor

OL10) The relocation of service industry functions to another country is called what?

offshoring

OL11) If General Motors imports parts from its plants in Canada and Mexico for finished trucks that it will sell across the NAFTA region, what type of trade does this represent?

Intra-industry trade

OL12) What environmental problem gets worse as income rises according to your text?

Carbon dioxide emission