2nd Edition Ball Test Bank

Module A International Institutions from a Business Perspective

1) International institutions provide nations the opportunity to build multilateral solutions through collaborative communication.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-01 Explain the importance of major international institutions to business decision makers.
Topic : Motives to Choosing a Collaborative Arrangement

Working together makes it more likely for international institutions to succeed because they develop multilateral solutions in which nations collaborate. The UN and the WTO encourage these efforts.

2) One of the significant differences between formal and informal institutions is how they gain compliance.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.
Topic : How Formal Institutions Affect Domestic and International Competition

Compliance is one of the major differentiators between formal and informal institutions.

3) New institutional theory suggests that institutions be understood as collections of rules and codes of conduct that limit behavior.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.
Topic : How Formal Institutions Affect Domestic and International Competition

New institutional theory suggests that institutions be understood as a collection of rules (as in rules of the game) that limit behavior.

4) By and large, the UN record of facilitating business transactions has been limited.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-03 Describe the United Nations as an institution and its relevance to international managers.
Topic : The United Nations

The United Nations is responsible for international agreements that affect commercial relationships, including much of the body of international law.

5) The United Nations operates with voluntary agreements, so it is essentially an informal institution.

⊚ true
⊚ false

Question Details
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-03 Describe the United Nations as an institution and its relevance to international managers.
Topic : The United Nations
AACSB : Analytical Thinking

Voluntary agreements constitute a majority of UN activities, so it is an informal institution. There are exceptions, such as peacekeeping forces which at times act as formal institutions.

6) The UN Environment Programme laid the groundwork for the Climate Change Convention, which in turn led to the Kyoto Protocol.

⊚ true
⊚ false

UN efforts to seek solutions to global environmental problems include the work of the UN Environment Programme (UNEP), the agency that laid the groundwork for the Climate Change Convention, leading to the 1997 Kyoto Protocol to reduce greenhouse gases, which came into effect in 2005.

7) Permanent members of the UN Security Council vote on Security Council measures and only the Secretary-General of the UN has veto power.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-03 Describe the United Nations as an institution and its relevance to international managers.
Topic : The United Nations

Each of the five permanent members—China, Russia, France, the United States, and the United Kingdom—has veto power.

8) The UN International Court of Justice (ICJ) hears cases that involve disputes between national governments.

⊚ true
⊚ false

The International Court of Justice (ICJ), also known as the World Court, makes legal decisions involving disputes between national governments and gives advisory opinions. Because only nations litigate before the court, governments often intervene on behalf of corporations and individuals in their countries.

9) The Bretton Woods Conference established the European Union currency, the euro.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-04 Describe the purposes of the two monetary institutions, the IMF and the World Bank.
Topic : The Role of the World Bank and the International Monetary Fund in the International Monetary System

Bretton Woods established the IMF and the World Bank.

10) The World Bank funds infrastructure projects in developed countries.

⊚ true
⊚ false

Question Details
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
AACSB : Analytical Thinking
Learning Objective : A-04 Describe the purposes of the two monetary institutions, the IMF and the World Bank.
Topic : The Role of the World Bank and the International Monetary Fund in the International Monetary System

The World Bank functions as a nonprofit cooperative for its member-nations, able to pass on to developing nations its ability to borrow funds at low rates.

11) Some think that renewed focus on exchange rates would be a good path forward for the IMF, which is struggling with core issues related to its purpose.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-04 Describe the purposes of the two monetary institutions, the IMF and the World Bank.
Topic : The Role of the World Bank and the International Monetary Fund in the International Monetary System

Today, as the IMF struggles with core issues related to its purpose in a changing world, some economists think that it might play a renewed role with exchange rates, offering a buffer to the market’s volatile movements

12) The World Bank is made up of one large institution, the International Development Association, and three smaller institutions.

⊚ true
⊚ false

The World Bank is composed of two major institutions, the International Bank for Reconstruction and Development and the International Development Association. The three smaller institutions are the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the International Centre for the Settlement of Investment Disputes. There are five units of the World Bank in total.

13) The International Finance Corporation (IFC) invests in companies and financial institutions in developing countries.

⊚ true
⊚ false

The International Finance Corporation (IFC) invests in companies and financial institutions in developing countries to build domestic capital markets so that local entrepreneurs have access to funding.

14) The WTO supports trade with discrimination as a basic right of trading nations.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.
Topic : Overview of Trade

One of the major principles of the WTO is trade without discrimination, that each member would have MFN status.

15) The WTO has negotiated a TRIPS agreement whereby property rights do not take precedence over public health.

⊚ true
⊚ false

Trade-related intellectual property rights do not take precedence over public health, which means that pharmaceuticals have lost their property rights on drugs patented before 1995.

16) Economic cooperation often begins with a common market as in the case of the EU.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : The Debate Concerning Global and Regional Economic Integration

Usually economic integration begins with an agreement to have a free trade area, as with NAFTA. A free trade area is the first level of economic integration, often followed by the customs union and common markets.

17) In a customs union, common external tariffs are added to an existing free trade area (FTA), as found in the Southern African Customs Union and Mercosur.

⊚ true
⊚ false

Question Details
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : The Debate Concerning Global and Regional Economic Integration
Bloom's : Understand
Difficulty : 2 Medium
AACSB : Analytical Thinking

That is exactly what a customs union is. Mercosur, the Common Market of the South, is actually a customs union at this point.

18) Trading blocs are designed to bring cost savings to international firms, whether inside or outside the trading bloc.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : The Debate Concerning Global and Regional Economic Integration
Bloom's : Understand
Difficulty : 2 Medium

Benefits depend on whether the firm is inside or outside the trading bloc. Cost reductions accrue to those inside the integrated area, but increases accrue to those outside the area.

19) ASEAN, whose initial, political goal was to foster peaceful relations among members, includes China as its core member.

⊚ true
⊚ false

The initial formation of ASEAN was an effort to combat the spread of communism. China is not a member, although there is a trade-related affiliation between ASEAN and China called ASEAN+3, which includes China, Japan, and South Korea.

20) The EU is administered by the European Commission, a group composed of six commissioners, elected at the EU level.

⊚ true
⊚ false

The European Commission is nominated at the country level, one member per country for a total of 28, and approved by the European Parliament.

21) With respect to the current state of global problems, Mark Malloch Brown, former deputy secretary-general of the United Nations, suggests that

A) as the world becomes more closely connected, it becomes less governable at the national level.
B) the UN is the only institution that can help us deal with complexity.
C) complexity can be addressed with trade organizations such as the EU and NAFTA.
D) military alliances are needed for increased peace in an increasingly complex world.

He suggests that in a world where the atmosphere is warming, the global economy lurches from crisis to crisis, and massively destructive civil wars erupt, we need to learn how to use our global institutions better, because our problems are too complex for individual nations to solve.

22) Strong institutions are vitally important to international business decision makers because they

A) provide ways to avoid or settle conflicts.
B) provide methods for moving trade forward.
C) are the foundation for our interactions.
D) hold power of trade processes.

Strong institutions are important for international decision makers because they allow for problem solving before confrontations reach the level of overt hostility.

23) Which type of institution operates through laws and regulations, with coercion as the regulative mechanism?

A) Formal
B) Informal
C) Normative
D) Cognitive

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-01 Explain the importance of major international institutions to business decision makers.
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium

Any organization that uses the threat of force to achieve compliance is formal.

24) Under new institutional theory, institutions can be categorized as formal and informal, and the informal institutions can be further categorized as

A) normative and cognitive.
B) normal and abnormal.
C) developed or developing.
D) effective and ineffective.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.

25) The Chinese concept of guanxi is an example of

A) an informal, cognitive institution.
B) a regulative, formal institution.
C) a face-saving tactic in a business setting.
D) taken-for-granted approaches to friendship relations.

Question Details
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.
AACSB : Diversity

Guanxi is a Chinese collection of values, an example of an informal cognitive institution that describes a relationship combining social capital and mentoring.

26) New institutional theory suggests that institutions provide

A) the rules of the game, reducing uncertainty.
B) conflict-free approaches to problem solving.
C) an instrument of change.
D) ways to reduce trade tariffs.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Topic : Various Types of Institutions in Global Business
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.

Institutions provide managers with the rules of the game, thereby reducing uncertainty in the firm’s external environment.

27) A government or the police are formal institutions that gain compliance through

A) the threat of force.
B) social conformity.
C) the need to know.
D) shared norms and values.

In formal institutions, laws and regulations are backed by force; we often comply for fear of reprisal.

28) Informal institutions work on the principle of

A) shared norms and values.
B) group consensus.
C) what goes round comes round.
D) social guilt.

Norms and values are the basis for compliance with informal institutions. (United Nations, GAAP).

29) The World Trade Organization is an example of an institution that "propagate(s) principles, and broadly represent(s) 'humanity.'" As such, the WTO is a (n)

A) normative institution.
B) cognitive institution.
C) formal institution.
D) cultural institution.

Informal normative institutions establish standards, “propagate principles, and broadly represent ‘humanity.’” Professional organizations and nongovernmental organizations (NGOs) that influence behavior through shared norms and values are examples of normative institutions. GAAP, the American Institute of Chartered Public Accountants (AICPA), the United Nations, and the World Trade Organization (WTO) are examples of informal normative institutions.

30) Informal normative institutions

A) establish standards and propagate humanitarian principles.
B) are recognized for their charity work.
C) use class hierarchy to establish values.
D) are found in few industrial economies.

Informal normative institutions establish standards, “propagate principles, and broadly represent ‘humanity.’”

31) An informal cognitive institution is

A) a collection of shared ideas that define reality.
B) a culturally determined way of thinking, such as inductive.
C) an approach to exploring ideas, such as Aristotelian dialogue.
D) a way to approach thinking challenges, such as brainstorming or tree diagrams.

An informal cognitive institution is a collection of shared ideas that define by means of conceptual frameworks, or schema, that are usually neither explicit nor tangible.

32) Which scenario demonstrates the concept of guanxi?

A) A Chinese company sought the advice of an elder to determine the best office layout for the optimum flow of energy.
B) A Chinese businessman would not commit to a project with an American company until he established a relationship with the local representative.
C) A Chinese businessman refused to do business with a foreigner who did not bow to him.
D) An American businesswoman started a business meeting without first taking time for casual conversation.

Question Details
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Difficulty : 2 Medium
Learning Objective : A-02 Describe institutions, drawing on new institutional theory.
Bloom's : Apply
AACSB : Knowledge Application

Guanxi relationships include social capital and mentoring, and are critical to a Chinese businessperson.

33) A manager from a U.S. company is negotiating with a Japanese company for goods. What is most likely to be the American's most important criteria in the purchasing decision?

A) the relationship
B) the follow-up
C) price
D) logistics

In the United States, price plays a more prominent initial role than the relationship, and at times may be the top criterion in the purchase decision.

34) The United Nations is a worldwide organization that is

A) a forum for the promotion of peace and global stability.
B) established to encourage economic equality among nations.
C) a critical member of the WTO.
D) a formal institution with strict regulations.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Easy
Bloom's : Understand
Learning Objective : A-03 Describe the United Nations as an institution and its relevance to international managers.
Topic : The United Nations

The purpose of the UN is to promote peace and global stability.

35) The UN's International Court of Justice is also known as

A) the Court of Europe.
B) the Court of International Law and Regulations (CILR).
C) the International Court of Peace.
D) the World Court.

The International Court of Justice (ICJ), also known as the World Court, makes legal decisions involving disputes between national governments and gives advisory opinions

36) The UN addresses global environment problems by

A) developing initiatives that support sustainable business practices.
B) partnering with businesses to address health and education issues.
C) promoting social justice and human rights in all countries.
D) working to stop terrorism and drug trafficking.

37) The purpose of the International Financial Corporation (IFC) is to invest in companies and financial institutions in developing countries to build

A) infrastructure.
B) trade agreements.
C) domestic logistics.
D) domestic capital markets.

Investing in the development of domestic capital markets helps to ensure that local entrepreneurs will have access to capital.

38) At the end of World War II, the UN called for the conference that set up the World Bank and the IMF. This conference was held in

A) San Francisco, California.
B) Yalta, Soviet Union.
C) Grasleben, Germany.
D) Bretton Woods, New Hampshire.

This was the Bretton Woods Conference.

39) The World Bank Group's two major institutions are the International Development Association and the

A) collateral-based Lending Agency.
B) International Bank for Reconstruction and Development.
C) International Microloan Bank.
D) International Bank for Development.

The International Bank for Reconstruction and Development is known as the World Bank. The three alternatives for this answer are all descriptors of the International Bank for Reconstruction and Development.

40) International Development Association's purpose is to loan to

A) the poorest nations.
B) developing nations needing capital.
C) developed nations for use in trade stimulus efforts.
D) any nation with collateral.

The IDA loans to the world's 75 poorest nations and represents the largest single source of donor funds for basic social services in these nations.

41) The common interest of all nations in a workable international exchange rate system transcends their conflicting international interests is the premise of

A) the International Monetary Fund (IMF).
B) the Bank for International Settlements.
C) the World Central Bank.
D) the World Bank for Reconstruction and Development.

The IMF handles the exchange rate system.

42) IMF quotas are determined by the relative size of a nation in the global economy and

A) are the nation's "dues" to the IMF.
B) limit trade among IMF members.
C) are paid by the countries' largest corporations.
D) are currently based on the gold standard.

IMF quotas are funds, or "dues," paid to the IMF by member nations.

43) The IMF initially played a central role in

A) establishing trade initiatives through GAAP measures.
B) supporting war-torn nations of Europe as they recovered from their devastation.
C) setting fixed exchange rates among nations' currencies with an established par value based on gold.
D) the monitoring of EU initiatives to restrain trade with South Africa.

One important significant role of the IMF was achieved through the Articles of Agreement, which established fixed exchange rates among nations' currencies, with a par value based on gold and the U.S. dollar, valued at $35/oz.

44) The major function of the World Bank is to serve as

A) a nonprofit banking cooperative for its members to meet development needs.
B) a central bank for the world's central bankers.
C) a nonprofit cooperative to finance the educational needs of its members.
D) an investor in funds in global businesses to create value for its shareholders.

The World Bank was established to meet development needs, and it passes on its ability to borrow funds at low rates to developing nations.

45) When did the dollar-based gold exchange standard in which the U.S. dollar became both a means of international payment and a reserve currency cease?

A) after the meeting at Bretton Woods
B) after WWI ended
C) in 1971 under President Nixon
D) in 1983 under Reagan

President Nixon took the United States off the gold standard in 1971 when he closed the gold window at the U.S. Treasury where people would exchange currency for gold.

46) The IBRD is a major institution of the World Bank whose function is to loan to

A) countries whose income levels make them not creditworthy.
B) private-sector development-focused firms.
C) private individuals in developing nations whose entrepreneurial efforts support development.
D) middle-income and creditworthy poor nations.

The IBRD loans to middle-income nations (GDP per capita from $1,000 to $10,000) and to creditworthy poor nations.

47) Does the IMF lend money?

A) yes, on a regular basis
B) yes, but as a last resort
C) yes, with few conditions
D) no, that is left up to the World Bank

IMF economists focus on providing technical assistance with exchange rate issues, macroeconomic policy and financial sector stability, serving as a lender of last resort.

48) The New Development Bank, headquartered in Shanghai, China, was formed by

A) ASEAN+3.
B) Mercosur.
C) the EU.
D) the BRICS group.

Frustrated with the dominance of developed nations in the IMF and World Bank, the BRICS group (BRIC nations plus South Africa) of vibrant emerging economies announced its members were forming their own development bank, the New Development Bank.

49) The WTO is the only international organization designed to establish and help implement

A) efforts at peace between nations.
B) rules of trade between nations.
C) security measures between nations.
D) strategic planning for developing nations.

The World Trade Organization (WTO), a rules-based, member-driven organization with decisions negotiated by all the member governments, is the only global international organization designed to establish and help implement rules of trade between nations.

50) The first principle of the WTO's five basic principles is trade without

A) negotiation.
B) economic reform.
C) discrimination.
D) competition.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.
Topic : Overview of Trade

The most-favored nation (MFN) principle, or trade without discrimination, requires that nations treat all WTO members equally.

51) The idea that WTO members treat all members equally is known as

A) the transparency principle.
B) the fairness principle.
C) the equity and equality principle.
D) the most favored nation (MFN) principle.

The most-favored nation (MFN) principle, or trade without discrimination, requires that nations treat all WTO members equally.

52) Is the WTO's idea of "fair competition" really a code phrase for free trade?

A) Yes, the WTO is in favor of free trade and only free trade under all circumstances.
B) Not really. Trade relationships among nations can be exceedingly complex, and the WTO supports fair competition, which may mean freer trade rather than free trade.
C) Yes, the WTO stands for trade liberalization, which requires transparency, economic reform, and no protectionism, regardless of the member nation's economic situation.
D) Yes. The WTO supports free trade and the term fair competition is used to obtain buy-in from nations opposed to trade liberalization.

Question Details
Accessibility : Keyboard Navigation
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.
Topic : Overview of Trade
AACSB : Analytical Thinking
Bloom's : Analyze
Difficulty : 3 Hard

The WTO promotes fair competition, which in many cases may mean something other than free trade. For example, trade in agricultural services and intellectual property is often negotiated to be fair rather than free.

53) The WTO has made progress on trade-related intellectual property rights (TRIPS). An example of this progress is

A) an agreement that property rights should not take precedence over public health.
B) an agreement that copyrights are inviolate.
C) a shared recognition that private property is a basic human right.
D) an agreement that governments should hold all pharmaceutical trade secrets.

The TRIPS agreement recognizes that property rights should not take precedence over public health. All adopting countries will have the right to copy drugs patented before 1995.

54) The Doha Development Agenda is

A) a WTO plan to establish free trade among the emirates in the Persian Gulf.
B) the government seat of Qatar and a source of significant WTO funding through Sheik Kalifa al-Thani.
C) a UN plan to develop the Arab Emirates to ensure their independence.
D) an extended conference of the WTO that initially convened in Doha.

The Doha Development Agenda, also known as the Doha Round, began in 2001 and has moved forward slowly since then.

55) What global membership institution provides information on economic and other activities within its member-nations and serves as a forum for discussion of shared economic and social policy issues, including publishing research on international business?

A) the World Trade Organization (WTO)
B) the Organisation for Economic Co-operation and Development (OECD)
C) the United Nations (UN)
D) the World Bank

The Organisation for Economic Co-operation and Development (OECD) provides information on economic and other activities within its member-nations and serves as a forum for discussion of shared economic and social policy issues. OECD publishes extensive research on a wide variety of international business and economic subjects.

56) The Doha Round began in 2001 to work on what agenda?

A) protecting the environment
B) infrastructure in developing countries
C) trade-related issues between developed and developing countries
D) a way to work with the expanding European Union

Talks known as the Doha Round began in 2001 in Doha, Qatar, to work on an agenda of trade-related issues between developed and developing economies.

57) The WTO exists to

A) establish and help implement rules of trade among nations to increase trade flows.
B) monitor and reduce the amount of trade from developing nations to developed nations.
C) ensure that the Industrial Revolution continues to support the economies of developed nations.
D) encourage development of trade barriers.

It’s the only global international organization designed to establish and help implement rules of trade between nations. The purpose of the WTO is to increase trade flows by reducing trade barriers.

58) WTO agreement on TRIPS had led to member agreement to

A) enforce 20-year patents and 50-year copyrights.
B) reduce trade barriers.
C) ensure immediate availability of generic drugs in developing economies.
D) repatriate foreign citizens convicted of property rights violations.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

Discussion of WTO’s trade-related intellectual property rights (TRIPS) has led to the acceptance of the duty to enforce property rights on 20-year patents and 50-year copyrights.

59) The Doha Round's discussions are contentious on several major issues, including

A) agriculture and intellectual property rights.
B) industrial goods and agriculture.
C) trade barriers and duties.
D) nontariff barriers and agriculture.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Easy
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

Agriculture and intellectual property rights are the major sticking points.

60) The Bali Package, proposed in 2013, focuses in part on

A) subsidies for food supplies.
B) security and technology.
C) infrastructure in developing countries.
D) market access for goods from the least-developed countries.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

In late 2013 meetings in Bali, the Bali Package agreement on market access for goods from the least-developed countries and increases in technical assistance was proposed.

61) Which two countries together account for one-third of the global population and have increased trade and reduced absolute poverty?

A) China and India
B) Japan and China
C) India and Russia
D) Russia and Brazil

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Topic : Various Types of Institutions in Global Business
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

Both China and India offer a sense of the WTO’s possibilities. Together they account for one-third of the global population, and in both countries, as a result of increased trade, absolute poverty has declined.

62) In a free trade area, members drop internal tariffs. External tariffs

A) are also dropped.
B) are coordinated so there is one agreed-upon set of external tariffs.
C) are maintained independently by each member.
D) do not apply to an FTA.

In an FTA, members drop internal tariffs and maintain independent external tariffs.

63) Economic integration often progresses

A) in stages, from free trade area to customs union to common market.
B) in stages, totally dependent on the members' national economic strength.
C) as a result of cultural beliefs and economic strength.
D) in unpredictable ways due to unintended consequences.

Economic integration often progresses from FTA to customs union to common market. Progressing from the FTA and the customs union, the next level of economic integration is a common market, created when a customs union lifts restrictions on the mobility of services, people, and capital among the member-nations. The EU offers a good example.

64) Most African nations have their main trade relationships

A) within local FTAs.
B) with other African nations due to transport costs.
C) with developed nations, often built on former colonial ties.
D) with China.

Most African nations have their major trade relationships with their former colonial rulers, in part because those are developed markets and in part because most African nations face daunting challenges that affect their economic strength, such as underdeveloped infrastructure, public health issues, and political insurgencies.

65) NAFTA maintains restrictions on the movement of labor. This is

A) within the scope of a free trade area.
B) within the scope of a common market.
C) not in compliance with WTO regulations.
D) unfair to Canadians and Americans.

Within an FTA, restrictions generally remain on the movement of services, labor, and capital.

66) The free trade area that was created in 1994 between Canada, Mexico and the United States is called

A) NAFTA.
B) CAFTA.
C) CMUS.
D) Association of the Americas

The North American Free Trade Agreement (NAFTA) created a free trade area among Canada, Mexico, and the United States that came into existence on January 1, 1994.

67) The EU began as a common market for

A) all imported goods from beyond Europe.
B) the textile and dairy industries.
C) the transportation industries.
D) the coal and steel industries.

French foreign minister Robert Schuman began the process with the integration of coal and steel into a common market in 1950.

68) The Treaty of Rome, signed in 1957, established a common market for coal and steel for

A) West Germany, Belgium, the Netherlands, France, Luxembourg, and Italy.
B) England, Ireland, Northern Ireland, Scotland, Wales, and France.
C) Finland, Sweden, Norway, West Germany, Denmark, and Switzerland.
D) Austria, Hungary, Slovakia, Poland, Romania, and Bulgaria.

The Treaty of Rome, signed in 1957, established a common market for coal and steel for the initial six members: West Germany, Belgium, the Netherlands, France, Luxembourg, and Italy. In the devastation created by World War II, Europeans recognized that their economic and political institutions had failed them. This awareness slowly developed into a tentative but persistent willingness to relinquish some aspects of national sovereignty in order to achieve greater economic and political stability.

69) Which nonmember country of the EU uses the euro as its official currency?

A) Bosnia
B) Albania
C) Belgium
D) the Vatican

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium

The euro is also used by at least six non-EU countries or entities (the Vatican, Monaco, Montenegro, Andorra, San Marino, and Kosovo) as official currency.

70) The EU's impact on international business is

A) negligible, given that the EU members tend to trade with each other.
B) not significant, because the EU members need to trade with other developed economies.
C) significant, since EU standards, especially in the areas of the environment and sustainability, impact any firm that wants to do business in the EU.
D) significant, because the EU is a major exporter into developing nations.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium

EU standards are advanced, especially in environmental and sustainability requirements, and, because of its market size, a number of EU regulations have major impacts in the United States, Japan, China, and elsewhere.

71) The main difference between a free trade area and a customs union is that in a customs union, there is

A) no need for passport controls.
B) a shared border patrol.
C) shared currency.
D) a common external tariff.

The FTA develops into a customs union with the addition of a common external tariff.

72) The oldest customs union is

A) the Southern African Customs Union.
B) the EU.
C) Mercosur.
D) the Canadian-U.S. Customs Union.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Easy
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : The Debate Concerning Global and Regional Economic Integration
Bloom's : Understand

The Southern African Customs Union (SACU), the oldest of all customs unions, was established in 1910, with South Africa, Lesotho, Namibia, Swaziland, and Botswana as members.

73) The Eurasian Economic Union, consisting of Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan, is an example of a

A) common market.
B) customs union.
C) free trade area.
D) multilateral free trade area.

The CIS (formerly, the Soviet Union) nations of Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan established a common market known as the Eurasian Economic Union.

74) Economic integration

A) involves a common market and a high degree of political integration.
B) is essentially a marketing program whose goal is to increase market penetration.
C) has not been attempted since the dissolution of the Soviet Union.
D) depends on the cultural similarities of its members.

Economic integration requires an unusual amount of shared political will.

75) This country has dramatically increased trade with Africa, especially in extraction sectors.

A) China
B) the United States
C) Cuba
D) Russia

China’s dramatically increasing involvement in African aid, trade, and FDI, especially in the extraction sectors, may lead to substantive economic growth for Africa.

76) The two major developed African economies are

A) South Africa and Nigeria.
B) Nigeria and Kenya.
C) South Africa and Kenya.
D) South Africa and the Central African Republic.

South Africa and Nigeria are the most developed of the African economies.

77) The regional economic integration agreement that includes Argentina, Brazil, Paraguay, and Uruguay is known as

A) ASEAN+3
B) The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA)
C) Mercosur
D) the South American Free Trade Zone

Mercosur is an acronym for the Common Market of the South, whose members are Argentina, Brazil, Paraguay, and Uruguay, with associate members Chile, Bolivia, Colombia, Ecuador, and Peru.

78) The Association of Southeast Asian Nations (ASEAN) was originally formed as

A) a cooperative military and security arrangement.
B) a political integration.
C) an economic integration.
D) a development resource.

It began as a cooperative military and security arrangement, which led to economic cooperation.

79) ASEAN +3 is

A) the 10 ASEAN nations plus China, Japan, and South Korea.
B) the 10 ASEAN nations plus Australia, India, and the state of Hawaii.
C) ASEAN's commitment to economic, political, and social prosperity.
D) ASEAN's commitment to trade, collaboration, and economic independence.

ASEAN+3 includes China, Japan, and South Korea, the three Asian developed nations.

80) The EU developed from a postwar (WWII)

A) coal and steel common market for the two commodities, the European Coal and Steel Community.
B) IMF and World Bank meeting charged to work out a settlement with Germany.
C) effort to allocate U.S. relief (the Marshall Plan) throughout Europe.
D) attempt to reduce the threat of the Soviet Union in Europe.

The EU began with the common steel and coal markets.

81) The economic integration of the EU is based on

A) national willingness to forego sovereignty in some areas.
B) self-interest and market common sense.
C) a delicate balance of political will and authoritarianism.
D) a commitment to build a trading bloc larger than the United States.

The willingness of nations to give up some of their sovereignty has made the continued economic integration possible.

82) The European Union is organized into nine institutions with functions similar to those performed by a national government. These institutions

A) represent the people of Europe and member-states.
B) are based on difference expertise areas, such as trade, politics, and governing.
C) are organized to work differently (consensus, plurality, simple majority) so that many approaches are included.
D) all share one concern: free trade among the member-states.

The European Union is organized into nine institutions with functions similar to those performed by a national government. These institutions represent the people of Europe and member-states.

83) Daily operations of the EU are conducted by the

A) European Commission.
B) European Parliament.
C) Council of the European Union.
D) European Administrative Coalition.

The European Commission is the administrative body that deals with daily operations.

84) Which country is currently being considered as a candidate to join the EU?

A) the Czech Republic
B) Iceland
C) Portugal
D) Slovenia

All of these countries are currently members of the EU except Iceland, which is a candidate for membership. Currently, there are six candidate countries: Albania, Macedonia, Iceland, Turkey, Montenegro, and Serbia; Bosnia and Herzegovina and Kosovo are in talks to join the candidates.

85) In 1993, the EC members signed the Maastricht Treaty, which established the European Union (EU), with three areas of integration: economic, foreign policy, and

A) domestic affairs.
B) trade policy.
C) environmental policy.
D) a common banking system.

In 1993, the EC members signed the Maastricht Treaty, which established the European Union (EU), with three areas of integration: economic, foreign policy, and domestic affairs.

86) Which nation voted in 2016 to terminate its membership in the European Union?

A) the United Kingdom
B) Germany
C) Switzerland
D) Norway

Switzerland and Norway made the decision not to join based on national elections. In addition, the United Kingdom voted in 2016 to terminate its membership in the European Union.

87) The euro was established by

A) the EU Parliament
B) the European Monetary Union
C) the European Court of Justice
D) the Council of the EU

The EU's Economic and Monetary Union (EMU), also known as the European Monetary Union, has established the euro (€), which has become a reserve currency second to the dollar.

88) Which institution of the EU is responsible for policy setting?

A) the European Parliament
B) the European Commission
C) the European Court of Justice
D) the Council of the European Union

The Council of the European Union represents the member-states and is the primary policy-setting institution of the European Union.

89) What company was fined millions of dollars by the EU for not complying with EU rules?

A) P&G
B) Microsoft
C) Amazon
D) Ford Motor Co.

Microsoft was fined millions of dollars for infractions by the EU, demonstrating how business practices have been influenced by the EU.

90) ________ institutions operate through laws and regulations to influence behavior.

Formal institutions operate through laws and regulations to influence behavior.

91) ________ institutions include motherhood, good manners, and gender roles.

Duty, motherhood, good manners, and gender roles are all examples of cognitive institutions.

92) GAAP is an example of an informal ________ institution that supports shared standards.

GAAP establishes standards and best practices in accounting processes.

93) ________ relationships, a Chinese collection of values, carry obligations that may be stronger than civic responsibilities and seemingly rational understandings of business situations.

Guanxi is a Chinese collection of values, an informal cognitive institution that describes a relationship combining social capital and mentoring. Guanxi relationships carry obligations that may be stronger than civic responsibilities and seemingly rational understandings of business situations.

94) The ________ has 193 member nations and is a stabilizing force in the world's economy by creating conditions under which international business thrives.

The United Nations (UN) is probably the best-known worldwide organization, and its 193 member-nations (nearly all the countries in the world) are dedicated to the promotion of peace and global stability. Given its stabilizing force in the world economy, the United Nations contributes to creating the conditions under which international business thrives.

95) The main deliberative body of the UN is the ________.

The General Assembly is composed of all UN members, with one vote each.

96) The UN ________ has the responsibility for maintaining international peace and security.

The UN Security Council has the responsibility for maintaining international peace and security.

97) The UN ________ is concerned with issues of trade, transport, industrialization, economic development, population growth, children, housing, women’s rights, racial discrimination, illegal drugs, crime, social welfare, youth, the human environment, and food.

The Economic and Social Council (ECOSOC) is concerned with issues you would expect from its name: trade, transport, industrialization, economic development, population growth, children, housing, women’s rights, racial discrimination, illegal drugs, crime, social welfare, youth, the human environment, and food.

98) The agency that laid the groundwork for the Climate Change Convention was the ________.

UN efforts to seek solutions to global environmental problems include the work of the UN Environment Programme (UNEP), the agency that laid the groundwork for the Climate Change Convention.

99) The UN staff is referred to as the ________.

The Secretariat, headed by the secretary-general of the United Nations, is the UN’s staff.

100) The Bretton Woods conference convened by the UN near the close of WWII established two monetary institutions, the ________ and the ________.

The World Bank and the International Monetary Fund were established at Bretton Woods. This was the world's first negotiated agreement to support trade through monetary institutions.

101) ________ are a reserve asset established by the IMF.

SDRs are a reserve asset that the IMF established whose value is linked to the currencies of IMF members; an SDR is a claim on them rather than the IMF.

102) IMF quotas are denominated in ________.

SDRs are a reserve currency.

103) The World Bank is actually composed of ________ agencies with focuses on various development challenges.

The five agencies are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID).

104) The ________, a group of developed countries, is known for its individual country surveys and other research studies.

OECD publishes extensive research on a wide variety of international business and economic subjects that is a well-regarded source for desk research related to international business.

105) Begun in 1995, the ________ aims to reduce or eliminate trade barriers and restrictions worldwide in order to reduce costs of doing business for producers of goods and services, exporters, and importers.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

The WTO was established in 1995 for just this purpose.

106) The principles of the WTO include trade without discrimination, known as the _____ principle.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

The most-favored nation (MFN) principle, or trade without discrimination, requires that nations treat all WTO members equally.

107) The WTO's second principle is ________ trade through negotiation.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

Freer trade suggests a gradual movement toward free trade.

108) The WTO operates with tariff ________, or agreements, to not raise a specific tariff over a given time period.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

The WTO operates with tariff “bindings,” or agreements, to not raise a specific tariff over a given time period.

109) The talks that began in Qatar in 2001, and continued in Mexico in 2003, focusing on constraints that limited the ability to benefit from the WTO trading system, were called the ________.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.

Talks known as the Doha Round began in 2001 in Doha, Qatar, to work on an agenda of trade-related issues between developed and developing economies. Developing nations face constraints that limit their ability to benefit from the WTO trading system.

110) In a ________, trade among members is tariff free.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Bloom's : Understand
Difficulty : 2 Medium
Topic : Economic and Political Arguments Surrounding Regional Economic Integration

An FTA is an agreement to trade among members without tariffs or duties.

111) Mercosur or Mercosul, known as the ________, whose full membership includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela, is currently a South American customs union.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Bloom's : Understand
Difficulty : 2 Medium
Topic : Economic and Political Arguments Surrounding Regional Economic Integration

The Common Market of the South is as often called Mercosur or Mercosul, and is technically an FTA working toward a common market.

112) In governance of the EU, the ________ represents the people of Europe.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Easy
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Bloom's : Understand
Topic : The Changing Nature of the Global Economy

The European Parliament is elected from the member-states.

113) Discuss the opinion some have that "the major international institutions are concerned with keeping the rich countries rich, at the expense of the poorer ones."

Question Details
Accessibility : Keyboard Navigation
Learning Objective : A-01 Explain the importance of major international institutions to business decision makers.
Topic : Various Types of Institutions in Global Business
AACSB : Analytical Thinking
Bloom's : Analyze
Difficulty : 3 Hard

114) Differentiate between the five organs of the United Nations by explaining their roles in the organization.

Question Details
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Learning Objective : A-03 Describe the United Nations as an institution and its relevance to international managers.
AACSB : Analytical Thinking
Bloom's : Analyze
Difficulty : 3 Hard

115) The five principles of the WTO (trade without discrimination, freer trade, predictability, fair competition, and encouraging development and economic reform) if followed, would provide developing nations a boost in their development. Agree or disagree.

Question Details
Accessibility : Keyboard Navigation
Topic : Various Types of Institutions in Global Business
Learning Objective : A-05 Discuss the resources of the Organisation for Economic Co-operation and Development and the World Trade Organization.
AACSB : Analytical Thinking
Bloom's : Analyze
Difficulty : 3 Hard

116) Describe the impact of the EU on the non-EU firm.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : A-06 Identify the types of trading blocs by their level of economic integration, with examples.
Topic : Various Types of Institutions in Global Business
Difficulty : 2 Medium
Bloom's : Apply

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Module A International Institutions From A Business Perspective

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