Economic And Socioeconomic Forces Test Bank 2nd Edition

Module 07 Economic and Socioeconomic Forces

1) The economic forces associated with the external environment are considered one of the most controllable forces.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Economic Development
Difficulty : 1 Easy
Learning Objective : 07-01 Explain the purpose of economic analyses.

Economic forces are among the most significant uncontrollable forces in the external environment businesses face.

2) The International Monetary Fund is a source of economic data that analysts can access to assess economic conditions.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Topic : Economic Development
Learning Objective : 07-01 Explain the purpose of economic analyses.

For many years, firms have been assessing and forecasting economic conditions at the national and international levels. To do so, analysts use data published by governments and international organizations such as the World Bank and the International Monetary Fund (IMF).

3) The purpose of economic analysis is to assess the overall outlook of the economy and the impact of economic changes on the firm.

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The purpose of economic analyses is to assess the overall outlook for the economy and the impact of economic changes on the firm.

4) The international environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

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The international environment includes the interactions between domestic and foreign environmental forces, or between sets of foreign environmental forces when an affiliate in one country does business with customers in another.

5) International economic analyses should provide economic data on both actual and prospective markets.

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International economic analyses should provide economic data on both actual and prospective markets.

6) A common basis for assessing economic development is gross domestic income.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 07-02 Compare different categories of countries, based on levels of national economic development.
Topic : Economic Development

A common basis for assessing economic development is gross national income.

7) Developed is the term given to nations that have achieved high income per capita.

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Developed economies are frequently characterized as those industrialized, or postindustrial, service-based nations that are economically advanced, with established infrastructures—roads, bridges, utilities, power supplies, communications, and other structural elements needed for the smooth operation of a society—and that have achieved high incomes per capita that support a high living standard, including material goods, access to health care, education, and other necessities.

8) Economies with per capita incomes in the low to middle range that are in a transition toward developed status are referred to as emerging market economies.

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Economies with per capita incomes in the low to middle range that are in a transition toward developed status are referred to as emerging market economies, a subcategory of developing economies. An emerging market economy is one with per capita income in the low to middle range as measured by the World Bank. It is usually in a transition toward developed status, having embarked on programs of economic development and reform to open up and grow markets in order to emerge on the global scene.

9) To estimate market potential, managers require data on the sizes and rates of change of a number of economic and socioeconomic factors.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 07-03 Outline the dimensions used to describe the economy and their indicators.
Topic : Differences in Economic Systems

To estimate market potential, managers require data on the sizes and rates of change of a number of economic and socioeconomic factors.

10) To compare the purchasing power of nations, managers need to know among how many people the gross national income (GNI) is divided.

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To compare the purchasing power of nations, managers need to know among how many people the GNI is divided.

11) Generally, it can be assumed, the higher the GNI/capita value, the more advanced the nation's economy.

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Generally, it can be assumed, the higher the GNI/capita value, the more advanced the nation's economy.

12) Purchasing power parity is a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.

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Purchasing power parity is a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.

13) Income distribution studies confirm the belief that income is more evenly distributed in the richer nations.

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Despite the difficulties associated with income distribution studies, such as inconsistent measuring practices and wide variations in the representativeness of samples, the data confirm the belief that, generally, income is more evenly distributed in the richer nations, although there are important variations among both developed and developing nations.

14) Discretionary income is the amount left after paying taxes.

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Disposable income is the amount left after paying taxes.

15) The percentage of household expenditures spent on consumer durables by households in developing nations is half the percentage spent by consumers in developed nations.

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The percentages of household expenditures spent on consumer durables by households of developed nations are twice those in developing nations.

16) Wages tend to vary more widely than hourly compensation because of the differences in the level of fringe benefits.

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Hourly compensation tends to vary more widely than wages because of differences in the level of fringe benefits.

17) A business is practicing vertical integration when it receives inputs for its production processes from outside sources.

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This is a common occurrence because the home plant usually has more vertical integration than its subsidiaries; that is, the home plant produces more of the inputs it needs for its own manufacturing processes.

18) Analysts know that a country with a large population is always a better market than a country with fewer people.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Topic : Differences in Economic Systems
Learning Objective : 07-04 Discuss the socioeconomic dimensions of economies and the indicators used to assess them.

The fact that many developed nations have fewer than 10 million inhabitants shows that population size alone is a poor indicator of economic strength and market potential. Only for a few low-priced products, such as soft drinks, cigarettes, and soap, might population size alone provide a basis for estimating consumption.

19) The population of developing countries accounts for very little of the world’s total population.

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Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Differences in Economic Systems
Learning Objective : 07-04 Discuss the socioeconomic dimensions of economies and the indicators used to assess them.
Bloom's : Remember
Difficulty : 1 Easy

The population of developing countries is more than three-quarters of the world’s total population.

20) Today, the rural-to-urban shift shows that at least half of the world’s population is living in cities.

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Another factor, especially in developing countries, is that people worldwide are moving to cities in search of higher wages and more conveniences. As an indicator of the extent of this rural-to-urban shift, note that in 2008, for the first time, half the world’s population was living in cities, and this proportion is projected to increase to 60 percent by 2030.

21) According to the book, what is the purpose of economic analyses?

A) to anticipate political developments within and across countries
B) to forecast exchange rates
C) to assess the overall outlook for the economy and the impact of economic changes on the firm
D) to compare the rate of economic and political change in order to determine financial variances

The purpose of economic analyses is to assess the overall outlook for the economy and the impact of economic changes on the firm.

22) Economic analyses become more complex when a firm enters overseas markets because unlike the situation for a company operating domestically,

A) the uncontrollable economic variables must be forecast.
B) management must operate in two new environments, foreign and international.
C) economists know less about foreign exchange rates.
D) analysts must now forecast the values for both socioeconomic and economic variables.

When a firm enters overseas markets, economic analyses become more complex because now managers must operate in two new environments: foreign and international.

23) The ________ includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

A) foreign environment
B) international environment
C) host country environment
D) global environment

The foreign environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

24) The ________ environment includes the interactions between domestic and foreign environmental forces, or between sets of foreign environmental forces when an affiliate in one country does business with customers in another.

A) foreign
B) international
C) host country
D) global

25) International economic analyses should

A) provide data to governments regarding a company's traditional markets.
B) provide economic data on actual and prospective markets.
C) be focused on economic conditions of nations in which a company's major competitors are located.
D) rely on published government data for input.

International economic analyses should provide economic data on both actual and prospective markets.

26) Because of the importance of economic information to the control and planning functions at headquarters, the collection of data and preparation of reports are usually the responsibility of

A) the home office.
B) national agencies.
C) economic consultants.
D) the international affiliate.

The collection of data and the preparation of reports are usually the responsibility of the home office. However, foreign subsidiaries and field representatives are expected to contribute heavily to studies of their markets. Data from areas where the firm has no local representation can usually be less detailed and are generally available from national and international agencies.

27) ________ refers to the total value of all income generated by the residents of a nation, including both the domestic production of goods and services and income from abroad.

A) Gross domestic product
B) Gross domestic income
C) Gross national income
D) Net national product

Gross national income refers to the total value of all income generated by the residents of a nation, including both the domestic production of goods and services and income from abroad.

28) The World Bank categorizes countries based on GNI per capita, using the following categories:

A) undeveloped economies, developing economies, developed economies.
B) developed economies, industrializing economies, developing economies.
C) developing economies, newly industrializing economies, developed economies.
D) high-income economies, middle-income economies, low-income economies.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 07-02 Compare different categories of countries, based on levels of national economic development.
Topic : Economic Development
Bloom's : Remember
Difficulty : 1 Easy

The World Bank categorizes countries based on GNI per capita, using the following categories: high-income economies, middle-income economies, low-income economies.

29) Frank is an economist and often measures the overall economic output of a nation even though he realizes it doesn’t account for the flows of FDI and income into and out of the nation. What measure is Frank using?

A) gross domestic product
B) international income debt
C) gross national income
D) purchasing power parity

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Learning Objective : 07-02 Compare different categories of countries, based on levels of national economic development.
Topic : Economic Development
Bloom's : Apply

Gross domestic product (GDP) measures the overall economic output of a nation but does not adequately account for flows of foreign income and investment into and out of the nation. As shown in Table 7.1, most developing nations have an unequal distribution of income with a very small middle class.

30) The International Monetary Fund would characterize a developing economy as one in which

A) technology is not as developed.
B) political activism is tempered.
C) there is a fair distribution of income.
D) the economy is more dependent on agrarian production than manufacturing.

In contrast, the term “developing economy” identifies the world’s lower-income nations, which are less technically developed.

31) Economies with per capita incomes in the low to middle range that are in a transition toward developed status are known as

A) undeveloped economies.
B) socialist economies.
C) high-income economies.
D) emerging market economies.

Economies with per capita incomes in the low to middle range that are in a transition toward developed status are known as emerging market economies.

32) When an international manager is considering where to do business, one of the first considerations is

A) whether the country has a democratically elected government.
B) the dominant religion in the country.
C) the size of the economy.
D) whether the country has a manufacturing sector.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Learning Objective : 07-03 Outline the dimensions used to describe the economy and their indicators.
Topic : Differences in Economic Systems
Difficulty : 1 Easy

When an international manager is considering where to do business, one of the first considerations is the size of the economy.

33) A measure of an economy's size based on the market value of goods and services produced within a nation in a year is

A) net national income.
B) gross domestic product.
C) gross national product.
D) gross national income.

A measure of an economy's size based on the market value of goods and services produced within a nation in a year is gross domestic product.

34) When measuring the value produced in an economy, most international organizations prefer to use

A) GNI.
B) GDP.
C) GNP.
D) PPP.

When measuring the value produced in an economy, most international organizations prefer to use gross national income, because GDP measures only the market value of goods and services produced within a nation in a particular year. Gross national income, on the other hand, is the total value of all income generated by the residents of a nation, including both the domestic production of goods and services and income from abroad.

35) Generally, we can assume that the higher the GNI/capita value

A) the lower the tax rate.
B) the smaller the population.
C) the larger the population.
D) the more advanced the economy.

What can we learn from GNI per capita? We can generally assume that the higher its value, the more advanced the economy.

36) The rate of growth of GNI/capita may be more important to marketers than just GNI/capita because

A) a stable rate indicates low risk for entry.
B) a high rate indicates a fast-growing market.
C) a high rate indicates economic instability.
D) low rates indicate political stability.

We can generally assume that the higher the value of GNI per capita, the more advanced the economy. However, the rate of growth may be more important to marketers because a high growth rate indicates a fast-growing market, which is always desirable.

37) Unrecorded transactions in an economy, such as goods and services that are bartered, are said to be part of which economy?

A) developing
B) forward
C) informal
D) developed

Moreover, many goods and services are bartered in both low-income nations (because people have little cash) and high-income countries (because people wish to reduce reported income to pay less income tax). Unrecorded transactions of this type are said to be part of the informal economy.

38) Dissatisfaction with both the purchasing power parity (PPP) and conversions using official exchange rates caused the World Bank to adopt what methodology to derive per capita GNI estimates?

A) GINI coefficients
B) Atlas conversion factors
C) inflation-growth coefficient
D) Zurich formula

Dissatisfaction with both the PPP and conversions using official exchange rates caused the World Bank to adopt the Atlas methodology to derive per capita GNI estimates.

39) The arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States, is known as

A) the GINI coefficient.
B) the Kolgorov coefficient.
C) the Zurich formula.
D) the Atlas conversion factor.

The arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States, is known as the Atlas conversion factor.

40) Incomes measured by the Atlas conversion factor are generally

A) more stable over time.
B) less stable over time.
C) impossible to stabilize.
D) not ready to be stabilized.

Incomes measured by the Atlas conversion factor are generally more stable over time, and changes in income rankings are more likely to be due to relative economic performance than to fluctuations in the exchange rate.

41) The part of a nation's income that, because of unreporting or underreporting, is not measured by official statistics is known as the

A) hidden economy.
B) gray market.
C) barter system.
D) underground economy.

The part of a nation's income that, because of unreporting or underreporting, is not measured by official statistics is known as the underground economy.

42) As a general rule, the underground economy in a country will be bigger when

A) tax rates are lower.
B) drug use is higher.
C) income levels are low.
D) government red tape is oppressive.

As a general rule, the higher the level of taxation and the more oppressive the government red tape, the bigger the underground economy will be.

43) Michelle has been tasked with the job of analyzing the economy of three South American countries to determine if they have business potential. In her final report, she makes note of national income that may not be reported because it involves illegal activity. This indicates that Michelle is accounting for what?

A) shadow production
B) litigation and arbitration
C) the gray market
D) the underground economy

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Learning Objective : 07-03 Outline the dimensions used to describe the economy and their indicators.
Topic : Differences in Economic Systems
Bloom's : Apply

Included in this underground economy are undeclared production of goods and services that are legal (unreported income or assets) and illegal (drugs, pirated copies of copyrighted music or video, gambling, use of undocumented workers, human trafficking, and prostitution) along with their corresponding activities (money laundering by drug smugglers or terrorist organizations), and concealed income in kind (barter).

44) Jamie lives in a country with oppressive tax rates and overwhelming government red tape that a company must go through to export its products. How might these factors affect the underground economy in this country?

A) The underground economy would be neutralized.
B) The underground economy would be bigger.
C) The underground economy would be smaller.
D) The underground economy would not exist.

As a general rule, the higher the level of taxation and the more oppressive the government red tape, the bigger the underground economy will be.

45) GNI/capita, a crude estimate of purchasing power, must be further refined by

A) an examination of the amount of income tax paid.
B) a census to determine the total population.
C) incorporating data on how the national income is actually distributed.
D) determining the amount of discretionary income.

Although differences in GNI per capita and economic growth rates do tell us something about the relative wealth of a nation's inhabitants, the information can be somewhat misleading because wealth is usually not evenly spread. Managers must refine these first crude estimates of purchasing power by incorporating data on how national income is actually distributed.

46) A measure of how a nation's income is apportioned among its people is called

A) purchasing power parity.
B) gross domestic product.
C) income distribution.
D) the Atlas conversion factor.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 07-03 Outline the dimensions used to describe the economy and their indicators.
Topic : Differences in Economic Systems
Bloom's : Remember
Difficulty : 1 Easy

A measure of how a nation's income is apportioned among its people is income distribution.

47) A measure of the degree to which family income within a country is distributed equally is called

A) gross national income.
B) the GINI index.
C) gross domestic product.
D) the Atlas conversion factor.

A measure of the degree to which family income within a country is distributed equally is called the GINI index.

48) A business would rely on the GINI Index to understand

A) the growth rate in production of competitor industries.
B) the degree to which family income is distributed equally within a country.
C) the relationship between income and expenses in a nation.
D) how industry is developed based on factors of endowment.

An additional measure of potential value for international companies is the GINI index, which measures the degree to which family income within a country is distributed equally.

49) From comparisons of income distribution studies over time, it generally appears that

A) income is more evenly distributed in the richer nations.
B) there are few variations in income distribution among developed and developing nations.
C) comparisons over time demonstrate that income redistribution changes relatively quickly, so older data have limited value.
D) the middle quintiles in most nations are growing at the expense of the bottom 20 percent.

From comparisons of income distribution studies over time, it generally appears that income is more evenly distributed in the richer nations, although there are important variations among both developed and developing nations.

50) Income distribution studies confirm the belief that, generally, income is more evenly distributed in the

A) richer nations.
B) developing nations.
C) newly industrialized nations.
D) Pacific Rim nations.

51) If a nation's GNI is small, but a small percentage of its population receives a large percentage of that income, it may be a good market for

A) high-priced industrial products.
B) high-volume, high-priced consumer products.
C) low-volume, high-priced luxury products.
D) low-priced, high-volume discretionary goods.

Depending on the type of product and the total population, both relatively even and relatively uneven income distribution can suggest market opportunities. Although South Africa's GDP was $597 billion in PPP terms, over half the total income is received by only the top 10 percent of the population, indicating sizable numbers are potential customers for low-volume, high-priced luxury products.

52) A market analyst may determine a country is not a good market by making a simple calculation based on

A) GNI/capita, total population, and the size of the hidden economy.
B) GNI, total population, and income distribution.
C) GNI/capita, population by state or province, and the number of pharmacies.
D) pet sales, number of CD players, and per capita lint production.

A simple calculation based on GNI, total population, and income distribution may be enough to indicate a particular country is or is not a good market.

53) After the taxes are taken out of her pay, Sharon takes home $1,254 in her paycheck. This dollar amount represents her

A) personal savings.
B) discretionary income.
C) gross income.
D) disposable income.

The after-tax personal income of consumers is known as disposable income.

54) The amount of income left after paying taxes and making essential purchases is known as

A) personal savings.
B) discretionary income.
C) gross income.
D) disposable income.

The amount of income left after paying taxes and making essential purchases is known as discretionary income.

55) Because ________ consumer expenditures eliminate differences in relative prices, marketers use these data to analyze how the composition of consumption changes with the level of development.

A) normalized
B) inflation-free
C) PPP-based
D) historical-cost

Because PPP-based consumer expenditures eliminate differences between prices, marketers use them to analyze how the composition of consumption changes with the level of development.

56) The percentages of household expenditures spent on food and beverages by residents of industrialized nations are ________ the percentages spent by residents of developing nations.

A) half
B) twice
C) equal to
D) triple

The percentages of household expenditures spent on food and beverages in developing nations are two to four times the percentages spent in industrialized nations.

57) The percentages of household expenditures spent on consumer durables by residents of industrialized nations are ________ the percentages spent by residents of developing nations.

A) half
B) twice
C) equal to
D) triple

The percentages spent on consumer durables by households of developed nations are twice those of developing nations.

58) The percentages of household expenditures spent on transportation, communication, and health care by residents of industrialized nations are ________ the percentages spent by residents of developing nations.

A) half
B) two-thirds
C) equal to
D) twice

The percentages spent on (1) transport and communication, (2) consumer durables, (3) health care, and (4) other consumption by households of developed nations are twice those of developing nations.

59) According to the text, commercial energy use per capita is related to the size of what set of modern sectors?

A) commercial buildings, agriculture, transportation
B) housing, agriculture, industry
C) manufacturing, agriculture, housing
D) urban areas, industry, motorized transport

Commercial energy use per capita is related to the size of the modern sectors—urban areas, industry, and motorized transport.

60) According to the World Bank, populations in high-income economies use how much commercial energy per capita as do people in developing economies?

A) half as much
B) twice as much
C) five times as much
D) nearly seven times as much

The World Bank has found that populations of high-income economies use nearly seven times as much commercial energy per capita as do people in developing economies.

61) Primary reasons for relative changes in labor costs include increases or decreases in

A) compensation.
B) total output.
C) inflation rates.
D) hours worked.

What are the reasons for the changes in labor costs? Three factors are responsible: (1) compensation, (2) productivity, and (3) exchange rates. Hourly compensation tends to vary more widely than wages because of differences in fringe benefits.

62) The three factors that contribute to changes in labor costs include

A) compensation, productivity, exchange rates.
B) education, inflation, recession.
C) exchange rates, agriculture, political policy.
D) poverty rates, birthrates, death rates.

What are the reasons for the changes in labor costs? Three factors are responsible: (1) compensation, (2) productivity, and (3) exchange rates.

63) Relative changes in wage rates among nations may cause the multinational firm to

A) choose new exchange rates.
B) reduce the number of workers.
C) change its sources of supply.
D) install labor-saving machinery.

According to the text, relative changes in wage rates among nations may cause the multinational firm to change its sources of supply from one country to another. For example, Nike, which has no production in the United States, began using Japanese plants in 1964. When labor costs rose there in the mid-1970s, the company changed to factories in South Korea and Taiwan and later added Thailand. But as labor costs rose in those countries, Nike shifted most of its production to contracted factories in China. As wage rates rose in China, Nike became concerned because its $75 to $175 (retail) shoes were costing as much as $10 to produce and ship to the United States. The company has undertaken efforts to move production to other locations, where wage rates can be at least 30 percent lower. The company now produces in 719 factories in 44 countries, although much of its shoe production remains in low-cost Asian nations such as Indonesia and Vietnam.

64) Unit costs of labor will decrease even though the firm is required to pay more to workers, provided

A) management compensation decreases significantly.
B) productivity increases fast enough.
C) advertising costs are proportional.
D) interest rates rise slowly.

Unit labor costs will not rise in unison with compensation rates if gains in productivity outstrip increases in hourly compensation. In fact, if productivity increases fast enough, the unit costs of labor will decrease even though the firm is required to pay workers more.

65) Unit labor costs will not rise in unison with wage rates if

A) the governments institute wage and price controls.
B) productivity decreases faster than wages increase.
C) the gains in productivity are greater than wage increases.
D) interest rates rise less than wage rates.

66) What typically occurs as the level of a government's debt increases?

A) A higher proportion of resources is invested into productive uses.
B) Government investments will increase.
C) Consumer confidence will rise.
D) More resources are redirected toward payment of interest.

As the level of debt increases, more resources are redirected toward payment of interest rather than invested for productive uses. Concern about a country's ability to meet its debt obligations can also increase uncertainty about its future economic performance, hinder governmental investment and responsiveness to infrastructural and other pressures, and lower consumer confidence.

67) A large international debt may result in

A) reduction in the level of component production at the local level.
B) decreased levels of foreign exchange available for importing components for local assembly.
C) increased numbers of importers.
D) growing levels of sales by home country factories that sell to the subsidiary in the indebted nation.

A nation's available foreign currency, known as foreign exchange, needs to be available to businesses to pay for imports billed in foreign currency. If a major part of the foreign exchange is used to pay international debts and cannot be used to import components for local products, then either local industries must manufacture the components or the companies that import them must stop production. Either alternative can cause the multinational to lose sales if it has been selling the parts made in one of its home country plants to its subsidiary.

68) One response to a large international debt is for a government to

A) remove wage controls.
B) increase government spending.
C) impose price controls.
D) reduce debt payments.

Governments with high debt may impose price controls (which make it difficult for a subsidiary to earn a profit), cut government spending (which reduces company sales), and impose wage controls (which limit consumer purchasing power).

69) A large international debt may cause a government to impose wage controls, which result in

A) limiting consumer purchasing power.
B) increasing government spending.
C) eliminating price controls.
D) expanding to a larger market.

70) Harrison Electric Corp. previously outsourced all the component parts it needed for its lighting products but now produces those parts in-house to use in the manufacture of these items. What concept did Harrison Electric Corp. adopt?

A) economies of scale
B) vertical integration
C) purchasing power parity
D) parallel exchange

71) Examples of socioeconomic data are

A) GNI, GNI/capita, income distribution.
B) total population, production density, and population distribution.
C) GNI/capita, total population, and population distribution.
D) total population, age distribution, and population density and distribution.

Examples of socioeconomic data are age distribution, and population density and distribution.

72) What benefit does population size provide when determining market potential?

A) Population size alone is an excellent indicator of economic strength.
B) Population size alone is a good predictor of demand for consumer durables.
C) Population size alone is an excellent indicator of market potential.
D) Population size alone is a poor indicator of market potential.

73) Jeremiah works for an all-natural breakfast cereal company. He has recommended that the company market their high-cost Oats ‘n More Cereal to parts of South America because there are millions of people there that have never heard of their products. Which socioeconomic factor is Jeremiah basing his recommendation on?

A) population size
B) market activity
C) age distribution
D) rural-to-urban shift

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Topic : Differences in Economic Systems
Learning Objective : 07-04 Discuss the socioeconomic dimensions of economies and the indicators used to assess them.
Bloom's : Apply

74) Generally, because of higher birthrates, developing countries often have

A) lower infant mortality rates.
B) more youthful populations than do developed nations.
C) an increasing demand in products for millennials.
D) more highly-skilled medical facilities.

Generally, because of their higher birthrates, developing countries have younger populations than do industrial countries.

75) What occurs when GNI increases faster than the population?

A) There probably is an expanding market.
B) The market is probably contracting.
C) The country where this occurs may be subject to political unrest.
D) The market is becoming less attractive for business.

Where GNI increases faster than the population, there is probably an expanding market, whereas the converse situation indicates possible market contraction and may even identify a country as a potential area of political unrest. This possibility is strengthened if an analysis of the educational system discloses an accumulation of technical and university graduates.

76) Currently, what percentage of the world’s total population is found in developing countries?

A) more than 75 percent
B) around 25 percent
C) close to 5 percent
D) under 50 percent

The population of developing countries is more than three-quarters of the world’s total population.

77) An examination of the world's population and predictions for future populations suggests the following:

A) The population of developing countries is nearly half of the world's total population.
B) The 10 nations predicted to have the largest populations by the year 2050 are all developing countries.
C) Developed nations will have a decreased demand for tourism and housing.
D) Developed nations will have an increased demand for financial services.

Because of low birthrates, developed nations will have an increased demand for medical care and related products, tourism, and financial services as the population ages.

78) Reductions in birthrates are occurring worldwide because

A) governments are scaling back family planning programs.
B) of a reduced level of urbanization.
C) women are gaining an enhanced status.
D) governments are supporting alternatives to marriage.

Many forces are responsible for reductions in birthrates. Governments are supporting family planning programs, to be sure, but there is ample evidence that improved levels of health and education along with an enhanced status for women, a more even distribution of income, and a greater degree of urbanization all act to reduce the traditional family size. In fact, experts have claimed for some time that the combined effects of a successful family planning program and the education of women beyond the primary level are extremely powerful in reducing family size.

79) Reductions in birthrates are occurring worldwide because

A) governments are scaling back family planning programs.
B) of an increased level of urbanization.
C) women are experiencing a decline in status.
D) governments are encouraging higher levels of marriage and at earlier ages.

80) What is predicted to happen with the population of many developed countries?

A) Population levels will soar as the result of economic upturn.
B) Population levels will fall by mid-century due to low birthrates.
C) Population levels will become static as younger generations remain childless.
D) Population levels will continue to move upward and downward as a reflection of political involvement.

An increasing number of young Europeans are not marrying, and those who do are marrying later and having fewer children. The population of many developed countries is projected to fall by mid-century due to low birthrates.

81) Japan is mentioned in the age distribution discussion of the text because

A) it is the fastest-graying nation in the industrial world.
B) in the future it may have almost as many retirees as children.
C) its declining population means that the country's wealth will be spread among a smaller number of people, increasing its overall prosperity.
D) its declining population means that the country's social security funds will last longer.

Japan's situation seems even more serious. Its fertility rate is only 1.5 children per woman, well below the 2.1 population replacement rate, and in 2035 people 65 and older will make up 32 percent of its total population, whereas the same age group in the United States will be only 21 percent of the total. At that point Japan, the fastest-graying nation in the industrial world, will have twice as many older people as it has children. The government's reserve of social security funds will have run dry because retirement and health costs for the elderly are forecast to consume 73 percent of national income. This situation will be even more problematic by 2050, when older adults make up more than 36 percent of the Japanese population.

82) The ratio between the number of older people and younger people, on whom elders are dependent to supply the funds to provide social security benefits, is called the

A) dependency ratio.
B) population distribution.
C) population density.
D) graying challenge.

The dependency ratio is a measure of those not in the workforce (dependency) and those in the workforce (productive).

83) Kellen has been asked to determine how many people live in the 50 square miles surrounding the location of the proposed building project. What does Kellen need to find?

A) population density
B) birthrate
C) population distribution
D) age distribution

Population density is a measure of the number of inhabitants per area unit (inhabitants per square kilometer or square mile).

84) ________ is a measure of the number of inhabitants per area unit.

A) Market size
B) Birthrate
C) Population distribution
D) Population density

Population density is a measure of the number of inhabitants per area unit.

85) ________ is a measure of how the inhabitants are distributed over a nation's area.

A) Urbanization
B) Population size
C) Population distribution
D) Population density

Population distribution is a measure of how the inhabitants are distributed over a nation's area.

86) The rural-to-urban shift is a reflection of

A) varying government standards on birthrates and population.
B) a change from industrialization to agricultural efforts.
C) property tax differences between geographic areas.
D) the movement of the population from rural areas to cities.

Another factor, especially in developing countries, is that people worldwide are moving to cities in search of higher wages and more conveniences, a phenomenon called the rural-to-urban shift.

87) As of 2008, what percentage of the world’s population was living in cities?

A) 85 percent
B) 50 percent
C) 10 percent
D) 1 percent

As an indicator of the extent of this rural-to-urban shift, note that in 2008, for the first time, half the world’s population was living in cities, and this proportion is projected to increase to 60 percent by 2030.

88) Parul reminded her coworkers that regardless of the number of consumers living in the target area, they should focus on where people live specifically within the target area. What aspect of the population is Parul concerned with?

A) population density
B) population distribution
C) population shift
D) population propensity

Population distribution is a measure of how the inhabitants of an area are distributed within that area.

89) Where are the greatest urban shifts now occurring?

A) low- and middle-income countries
B) high-income regions
C) domestic markets
D) developed regions

As Table 7.8 indicates, the greatest urban shifts are occurring in low- and middle-income countries.

90) Marketers are interested in knowing the trend of women entering the workforce because this may

A) result in larger family income.
B) provide a smaller market for consumer durables.
C) be responsible for a baby boom.
D) reduce the rate of rural-to-urban shift.

The increase in the number of working women, for example, is highly significant because it may result in larger family incomes, a greater market for convenience goods, and a need to alter promotional methods.

91) Collin’s company is interested in the divorce rate in parts of Europe. His company produces single-serving meal kits that might be of interest to people who were married but are now single. Which type of factor is Collin’s company analyzing?

A) economic
B) psychosocial
C) political
D) socioeconomic

Data on a country’s divorce rate will help alert the marketer to the formation of single-parent families and single-person households, whose product needs and buying habits differ in many respects from those of a two-parent family. In many countries, important ethnic groups require special consideration by both marketing and human resource managers.

92) The ________ environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

The foreign environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

93) The ________ environment includes the interactions between domestic and foreign environmental forces, or between sets of foreign environmental forces when an affiliate in one country does business with customers in another.

94) ________ is the total value of all income generated by a nation's residents from international and domestic activity.

Gross national income is the total value of all income generated by the residents of a nation, including both the domestic production of goods and services and income from abroad.

95) ________ is a classification for the world's low- and middle-income nations.

Another classification of economic development distinguishes between developed and developing economies, with low- and middle-income economies referred to as developing economies.

96) ________ are frequently characterized as those industrialized, or postindustrial, service-based nations that are economically advanced, with established infrastructures—roads, bridges, utilities, power supplies, communications, and other structural elements needed for the smooth operation of a society—and that have achieved high incomes per capita that support a high living standard.

97) Economies with per capita incomes in the low to middle range that are in a transition toward developed status are referred to as ________.

Economies with per capita incomes in the low to middle range that are in a transition toward developed status are referred to as emerging market economies.

98) ________ measures the market value of goods and services produced within a nation in a particular year.

Gross domestic product measures only the market value of goods and services produced within a nation in a particular year.

99) ________ is a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.

Purchasing power parity is a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.

100) The ________ includes undeclared production of goods and services that are legal and illegal.

The underground economy includes undeclared production of goods and services that are legal and illegal and is the part of a nation's income that, because of unreporting or underreporting, is not measured by official statistics.

101) ________ is a measure of how a nation's income is apportioned among its people.

Income distribution is a measure of how a nation's income is apportioned among its people.

102) The ________ is a measure of the degree to which family income within a country is distributed equally.

The GINI index is a measure of the degree to which family income within a country is distributed equally.

103) One area of interest to marketers is the manner in which consumers allocate their after-tax personal income, also known as ________.

One area of interest to marketers is the manner in which consumers allocate their after-tax personal income, also known as disposable income.

104) The amount of income left after paying taxes and making essential purchases is called ________.

The amount of income left after paying taxes and making essential purchases is discretionary income.

105) ________ refer to total direct labor costs divided by units produced.

One factor that contributes to a favorable investment opportunity is lower unit labor costs, or total direct labor costs/units produced, than are currently available to the firm.

106) The reasons for the relative changes in labor costs include compensation, productivity, and ________.

The reasons for the relative changes in labor costs include compensation, productivity, and exchange rates.

107) A firm that produces its own inputs for its subsequent manufacturing processes is practicing ________.

A firm that produces inputs for its subsequent manufacturing processes is vertically integrated.

108) The most general, but poor, indicator of potential market size is ________.

The most general indicator of potential market size is total population. The fact that many developed nations have fewer than 10 million inhabitants shows that population size alone is a poor indicator of economic strength and market potential.

109) A measure of the number of inhabitants per area unit is called ________.

A measure of the number of inhabitants per area unit is population density.

110) A measure of how the inhabitants are distributed over a nation's area is called ________.

A measure of how the inhabitants are distributed over a nation's area is population distribution.

111) The movement of a nation's population from rural areas to cities is known as the ________.

The movement of a nation's population from rural areas to cities is known as the rural-to-urban shift.

112) Discuss the purpose of international economic analyses and the challenges facing managers who are attempting to conduct such analyses.

113) Compare and contrast the characteristics of economically developing and developed nations.

114) Discuss three ways an international manager can measure the size of an economy.

115) Describe why international managers would be interested in age distribution studies.

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