The political dimension Chapter 6 Test Bank

Chapter 6

Test Bank

Type: true-false

Title: Chapter 06 Question 01

1) The level of government intervention in commercial activities is similar across most countries.

a. True

b. False

Feedback: For ideological reasons there is considerable variation between countries in the level of government intervention in commercial activities.

A-Head Reference: 6.2 The rationale for government involvement

Type: true-false

Title: Chapter 06 Question 02

2) A democratic political system is based on the belief that citizens should be directly involved in decision making?

a. True

Feedback: Democracy is based on the widest possible involvement of the citizenry in decision-making, both political and economic.

A-Head Reference: 6.3 Elements of the political environment

b. False

Type: true-false

Title: Chapter 06 Question 03

3) Since the 1980s, emerging countries have experienced substantial market liberalisation and privatisation

a. True

Feedback: Many emerging economies have undergone substantial reforms including liberalisation and privatisation which have facilitated growth and their involvement in the global economy

A-Head Reference: 6.6 Levels of geopolitical involvement

b. False

Type: true-false

Title: Chapter 06 Question 04

4) The number of command economies has increased since the demise of communism in the late 1980s.

a. True

b. False

Feedback: The number of command economies has been substantially reduced since the collapse of the Soviet Bloc and the adoption of market reforms by many economies.

A-Head Reference: 6.3 Elements of the political environment

Type: true-false

Title: Chapter 06 Question 05

5) Privatisation involves the transfer of state property into private ownership True/False

a. True

Feedback: Privatisation is the transfer of assets into the hands of private citizens and hence involves the transfer of state property to the private sector.

A-Head Reference: 6.6 Levels of geopolitical involvement

b. False

Type: true-false

Title: Chapter 06 Question 06

6) A mixed economy includes elements from both a market economy and a command economy.

a. True

Feedback: By definition a mixed economy involves a mix of market and government (or command) activities.

A-Head Reference: 6.3 Elements of the political environment

b. False

Type: true-false

Title: Chapter 06 Question 07

7) A free trade area (such as NAFTA) can be described as a group of countries committed to eliminating all internal barriers to free movement of goods and services but following independent external trade policies True/False.

a. True

Feedback: This is a definition of a free trade area, the critical distinction from other forms of regional integration is the freedom to adopt an independent external trade policy.

A-Head Reference: 6.6 Levels of geopolitical involvement

b. False

Type: true-false

Title: Chapter 06 Question 08

8) The commonly observed link between political ideology and economic system is that countries that support individual goals are more likely to have a market based economy.

a. True

Feedback: Since the individual consumer is at the heart of a market based economy the support of individual goals is more likely to be observed in a market economy.

A-Head Reference: 6.3 Elements of the political environment

b. False

Type: true-false

Title: Chapter 06 Question 09

9) In a market economy the types, quantities and prices of goods sold are determined by government planning True/False.

a. True

b. False

Feedback: In a market economy, decisions on what is produced, quantities produced, and the prices that goods are exchanged, at are determined primarily by market forces (demand and supply).

A-Head Reference: 6.4 Varieties of capitalism

Type: true-false

Title: Chapter 06 Question 10

10) Collectivism (or collective ownership) is a system that stresses the primacy of collective goals over individual goals True/False.

a. True

Feedback: Collectivism stresses the importance of collective goals such as military or economic dominance over individual goals.

A-Head Reference: 6.3 Elements of the political environment

b. False

Type: true-false

Title: Chapter 06 Question 11

11) According to the Varieties of Capitalism approach, because of institutional advantage, radical innovations are more likely to be observed in coordinated market economies

a. True

Feedback: The statement is incorrect as the research evidence suggests that coordinated markets stress information coordination and exchange, facilitating process rather than radical innovations.

A-Head Reference: 6.4 Varieties of capitalism

b. False

Type: true-false

Title: Chapter 06 Question 12

12) In a coordinated market economy, the institutional focus is on encouraging firm cooperation and consistency.

a. True

Feedback: In a coordinated market economy the challenge is to ensure information exchange and consistency in firm behaviour. This is the key task of institutions.

A-Head Reference: 6.4 Varieties of capitalism

b. False

Type: true-false

Title: Chapter 06 Question 13

13) Risk insurance and contingency planning are examples of a defensive or reactive approach to political risk management

a. True

Feedback: Defensive approaches attempt to minimise the costs of political actions rather than the probability of them occurring. Risk insurance and contingency planning are intended to do this.

A-Head Reference: 6.9 Managing political risk

b. False

Type: true-false

Title: Chapter 06 Question 14

14) A 'host-plus-one' strategy reduces political risk by encouraging two host country governments to collaborate in political decision making

a. True

b. False

Feedback: This is clearly incorrect since the strategy refers to the global factory operating two sites, one perhaps a ‘mirror’ of the other to reduce dependence on a particular location.

A-Head Reference: 6.9 Managing political risk

Type: true-false

Title: Chapter 06 Question 15

15) Integrating an affiliate operation within the host country environment is an example of an integrative approach to political risk management

a. True

Feedback: Integration has the effect of increasing the apparent contribution that the affiliate makes to the host economy, building legitimacy and acceptance and hence, reducing the likelihood of punitive political action

A-Head Reference: 6.9 Managing political risk

b. False

Type: true-false

Title: Chapter 06 Question 16

16) Cultural differences between host country officials and MNE management reduce the risk of disagreement in negotiations

a. True

Feedback: As in any general negotiation situation, cultural differences are likely to increase not decrease the likelihood of disagreement since the parties may not have shared values and expectations.

A-Head Reference: 6.10 Political negotiation and conflict

b. False

Type: true-false

Title: Chapter 06 Question 17

17) Since the 1980s globalisation wave has brought greater convergence of business and government commercial interests facilitating the development of the global factory

a. True

Feedback: This is correct, certainly this has been the case since the 1980s. There is some evidence to suggest that in recent months the position may be changing with growing nationalist sentiment.

A-Head Reference: 6.12 Implications for the global factory

b. False

Type: true-false

Title: Chapter 06 Question 18

18) All other things equal, a rise of populism is likely to negatively impact the operations of a global factory

a. True

Feedback: This is true since nationalism could restrict trade, regional agreements, and migration of employees.

A-Head Reference: 6.3 Elements of the political environment

b. False

Type: true-false

Title: Chapter 06 Question 19

19) The use of externalisation strategies by global factories can help reduce likely levels of political risk and disagreement experienced in a host country

a. True

Feedback: Externalisation of activities to local partners who have strong political connections, cultural similarities and low ‘liability of foreignness’ can reduce these risks.

A-Head Reference: 6.9 Managing political risk

b. False

Type: true-false

Title: Chapter 06 Question 20

20) The perceived instability of global factory operations means that host country investments in competitive infrastructure are rarely worthwhile.

a. True

b. False

Feedback: Such investments are likely to be required to attract global factory operations in the first place and even if divestment occurs, they may be critical in the decision making of other investors. Such investments are crucial for maintaining locational advantage.

A-Head Reference: 6.12 Implications for the global factory