International Business The Challenge of Global Competition 13th Edition Donald Ball – Test Bank

 

 

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Sample Test

Chapter 03

International Institutions from an International Business Perspective

 

 

True / False Questions

1.	As discussed in the chapter, institutions are organizations constructed to create jobs for government employment initiatives. True    False

 

2.	New institutional theory suggests that institutions be understood as collections of rules and codes of conduct that limit behavior. True    False

 

3.	One of the significant differences between formal and informal institutions is how they gain compliance. True    False

 

4.	Informal cognitive institutions are not important to international managers because such managers localize their hiring, and so they can draw on local talent. True    False

 

5.	International institutions provide nations the opportunity to build multilateral solutions, and thus make significant contributions to international stability. True    False

 

6.	The United Nations operates with voluntary agreements, so it is essentially an informal institution. True    False

 

7.	The UN Environment Programme laid the groundwork for the Climate Change Convention, which led to the Kyoto Protocol. True    False

 

8.	Permanent members of the UN Security Council vote on Security Council measures, and only the secretary-general of the UN, Ban Ki-Moon, has veto power. True    False

 

9.	The UN International Court of Justice hears cases that involve disputes between national governments. True    False

 

10.	By and large, the UN record of facilitating business transactions has been minor. True    False

 

11.	The Bretton Woods Conference established the European Union currency, the euro. True    False

 

12.	The World Bank funds infrastructure projects in developed countries. True    False

 

13.	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

 

14.	The World Bank is made up of one large institution, IBRD. True    False

 

15.	The International Finance Corporation (IFC) acts as an investment banker, arranging private risk ventures in developing countries. True    False

 

16.	The WTO supports trade with discrimination as a basic right of trading nations. True    False

 

17.	The Doha Development Agenda is an extended development plan for Doha, Qatar. True    False

 

18.	Although India is a member of the WTO and has benefited greatly from increased trade as a result of WTO agreements, China is not yet a member. True    False

 

19.	The WTO has negotiated a TRIPS agreement whereby property rights do not take precedence over public health. True    False

 

20.	Recently, regional trade agreements have grown, a trend that may be seen to strengthen the WTO, according to the text. True    False

 

21.	Economic cooperation often begins with a common market, as in the case of the EU. True    False

 

22.	In a customs union, common external tariffs are added to an existing FTA, as found in the Southern African Customs Union and Mercosur. True    False

 

23.	Among trading blocs, the EU has the largest GDP per capita. True    False

 

24.	Trading blocs always bring cost savings to international firms. True    False

 

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

 

26.	The EU is a supranational body that has become, essentially, a regional government. True    False

 

27.	The EU is administered by the European Commission, a group composed of 27 commissioners elected at the EU level. True    False

 

28.	The EU has been unsuccessful at harmonizing customs and tax formalities within member nations’ borders. True    False

 

29.	Although the EU can influence the practices of businesses located in non-EU-member countries, Microsoft has been able to maintain business in the EU much as it conducts business in the United States. True    False

 

30.	All EU members use the euro and thus have given up part of their national sovereignty to the EU. True    False

 

31.	Institutions are constructed to provide meaning and stability to social life, regulate the relations of individuals to each other, and limit behavior of individuals and firms. True    False

 

32.	Formal institutions operate through laws and regulations. They require members to make a written commitment. True    False

 

33.	Cognitive institutions are important to the international manager because these institutions help the manager understand the schema operating in their international environments and are easily missed or misunderstood by the non-native, so schemas can easily lead to misunderstandings. True    False

 

34.	Examples of informal, normative institutions would include local town/city governments and the U.S. government. True    False

 

35.	An example of an informal, cognitive institution would be the celebration of Halloween. True    False

 

36.	The following is an area in which the UN plays a significant role for international business: loaning seed money for entrepreneurial start-ups in developed nations. True    False

 

37.	The UN General Assembly is the main staff organization responsible for the UN administration. True    False

 

38.	As Kofi Annan, former secretary-general of the UN, observed, the UN exists to help us master the challenges of our common, global destiny, which we can do only if we face them together. True    False

 

39.	The International Court of Justice (ICJ) handles all cases brought forward by any person or organization. True    False

 

40.	An important assumption that the IMF makes is that a strong organization with rules and penalties for their violation is necessary to support trade. True    False

 

 

Multiple Choice Questions

41.	IMF quotas are determined by the relative size of a nation in the global economy and: A. determine the weight of the nation’s voting in the IMF.   B. determine how much a nation can borrow from the IMF.   C. are the nation’s “dues” to the IMF.   D. all of the above.

 

42.

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.

 

43.

The major function of the World Bank is to serve as a: A. nonprofit banking cooperative for its members to meet development needs.   B. central bank for the world’s central bankers.   C. nonprofit cooperative to finance the educational needs of its members.   D. investor of funds in global businesses in order to create value for its shareholders.

 

44.

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. privateindividuals in developing nations whose entrepreneurial efforts support development.   D. middle-income and creditworthy poor nations.

 

45.

The WTO exists to: A. establish and help implement rules of trade among nations in order 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. B and C.

 

46.

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 faircompetition is used to obtain buy-in from nations opposed to trade liberalization.

 

47.

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 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 initially convened in Doha.

 

48.

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.

 

49.

Regional trade agreements such as NAFTA can be seen to impact the WTO: A. negatively, because they undercut the nondiscrimination principle of the WTO.   B. positively, because they extend most-favored-nation status to more nations.   C. negatively, because they compete with the WTO for membership, since nations can belong to only one trade group.   D. negatively, because the United States and the EU do not have a regional trade agreement between them.

 

50.	In a free trade area, members drop internal tariffs. External tariffs: A. are dropped also.   B. are coordinated so that there is one agreed-upon set of external tariffs.   C. are maintained independently by each member.   D. do not apply to an FTA.

 

51.

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.

 

52.	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.

 

53.	ASEAN began as a defensive alliance of 10 Asian nations concerned about: A. trade barriers in the West.   B. translation issues for their export products.   C. the spread of communism in their region.   D. Japan’s influence in the region.

 

54.	NAFTA maintains restrictions on the movement of labor, a limitation that suggests it is: A. a free trade area.   B. a common market.   C. not in compliance with WTO regulations.   D. B and C.

 

55.	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.

 

56.

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.

 

57.	The EMU (European Monetary Union or Economic and Monetary Union) has established the euro, a currency that is used in: A. all of the EU.   B. all of the EU and much of the rest of Europe.   C. 16 of the EU member-countries.   D. the Bank for International Settlements and the IMF.

 

58.

The Council of European Union, the primary policy-setting institution of the EU, is composed of: A. the member-states’ prime ministers or presidents.   B. the member-states’ ministers who represent the specific area being discussed.   C. elected members from across Europe, elected by country.   D. appointed representatives from each member-state.

 

59.

The impact of the EU on the WTO could be said to be negative, since: A. a country could belong to only one of these organizations.   B. the favored trade relationships among EU members are not extended to nonmember countries, so the EU undercuts the WTO.   C. the euro threatens other hard currencies supported by the WTO, such as the dollar and the yen.   D. the WTO does not collect dues from EU member-nations.

 

60.

The EU’s impact on international business is: A. negligible, since the EU members tend to trade with each other.   B. not significant, since the EU members need to trade with other developed economies.   C. substantial, since EU standards, especially in the areas of ecology and sustainability, impact any firm that wants to do business in the EU.   D. substantial, since the EU is a major exporter into developing nations.

 

61.	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. informally cognitive and formally cognitive.   D. effective and ineffective.

 

62.

In developing economies, informal institutions tend to play a greater role than in developed economies, possibly because A. the developing economies have more ambiguity and lack formal institutions by definition, so informal institutions step into the breach.   B. developing economies show cultural preference for informality.   C. informal institutions emerge to give order to the unstructured, chaotic environment.   D. A and C.

 

63.	This type of institution operates through laws and regulations, with coercion as the regulative mechanism. A. formal   B. informal   C. normative   D. cognitive

 

64.	Informal institutions are composed of sets of: A. mandatory agreements, a bit like the mind’s software.   B. orthodox accords whose goal is to establish rigor.   C. agreements that are for the most part written and taken for granted.   D. voluntary agreements.

 

65.	The Chinese concept of guanxi is an example of: A. aninformal, cognitive institution.   B. a regulative, formal institution.   C. a favorite cooking method of Chairman Mao.   D. taken-for-granted approaches to friendship relations.

 

66.	The United Nations is probably the best known among: A. for-profit organizations.   B. social service organizations.   C. international organizations.   D. military organizations.

 

67.	All UN member-countries belong to the UN’s: A. Peace Jurga.   B. General Assembly.   C. Internal Court of Justice.   D. Committee on Intelligence.

 

68.	The UN’s International Court of Justice (ICJ) 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. theWorld Court.

 

69.	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: A. convened in San Francisco.   B. held at Yalta.   C. held at Grasleben, Germany.   D. held at Bretton Woods, New Hampshire.

 

70.

That 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.

 

71.	The World Bank’s two major institutions are the International Development Association and the: A. Collateral-Based Lending Agency.   B. International Bank for Reconstruction and Development (IBRD).   C. International Microloan Bank.   D. International Bank for Development.

 

72.	The geographical area that receives the most International Development Association (IDA) credits and grants is: A. East Asia.   B. Latin America and the Caribbean.   C. Africa.   D. Middle East.

 

73.	IDA’s purpose is to loan to: A. the poorest nations.   B. middle-level-income nations needing infrastructure.   C. developednations for use in trade stimulus efforts.   D. any nation with collateral.

 

74.	The purpose of the International Financial Corporation (IFC) is to invest in companies and financial institutions in developing countries in order to build: A. infrastructure.   B. trade routes.   C. domestic logistics.   D. domestic capital markets.

 

75.	The WTO is the only international organization designed to establish and help implement: A. efforts at peace between nations.   B. rules of trade among nations.   C. security measures between nations.   D. strategic planning for developing nations.

 

76.	The first principle of the WTO’s five basic principles is trade without: A. negotiation.   B. economic reform.   C. discrimination.   D. competition.

 

77.	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 MFN (most-favored-nation) principle.

 

78.	The Doha Development Agenda is: A. a WTO conference on trade.   B. an agreement on climate control and greenhouse gases.   C. a decision-making approach to development.   D. a development rules list.

 

79.	The results of liberalized trade so far have been: A. beneficial for developing economies.   B. harmful for developing economies.   C. unconnected to developed economies.   D. uneven for developing and developed economies.

 

80.	The main difference between a free trade area (FTA) 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.

 

81.	ASEAN began as a: A. free trade pact.   B. cooperativemarketing alliance among Southeast Asian nations.   C. security and military alliance among Southeast Asian nations.   D. response to the EU.

 

82.	The Organization for Economic Cooperation and Development provides information on: A. militaryalliances.   B. economic and other activities within its member-nations.   C. trade imbalances for nonmember countries.   D. sovereign debt risk.

 

83.	The following country is not a member of ASEAN: A. Indonesia.   B. Vietnam.   C. Cambodia.   D. China.

 

84.	How many countries in the EU use the euro as their currency? A. 17   B. 23   C. 15   D. 7

 

85.	“Trade without discrimination” in the WTO means that A. the MFN principle can be ignored.   B. all trading partners must be treated the same.   C. racially based trading patterns are tolerated.   D. developing and developed nations must be separated for trading purposes.

 

86.	The UN is important to international business for many reasons, including that it: A. develops standards and norms in technical areas.   B. monitors trade patterns.   C. arranges trade missions to developing nations.   D. arranges international funding for business education.

 

87.

International institutions are important to international business managers because, in general, they: A. limit financial responsibility of business.   B. promote development.   C. limit choices, thereby providing ways to settle disagreements and resolve conflicts.   D. encourage immigration and labor mobility.

 

88.	International institutions offer graduating international business majors: A. interesting career development and internship opportunities.   B. funded study-abroad programs.   C. language training in major languages used in trade.   D. export-import process training.

 

89.	EU rulings: A. affect all businesses headquartered within the EU.   B. affect all businesses within the EU and those that trade within the EU.   C. limit businesses outside the EU but not in the United States.   D. are of no importance outside the EU.

 

90.	The OECD is called the “rich man’s club” because its members: A. are rich and male.   B. are 34 of the world’s wealthiest nations.   C. are concerned with increasing their own wealth rather than promoting development.   D. promote wealth at the cost of health and safety.

 

91.	The main purpose of the OECD is to: A. provide economic research and a discussion forum.   B. function as a developed-nation cartel.   C. limit growth in developing economies.   D. support trading patterns within the group of developed nations.

 

92.	The OECD has encouraged members to: A. develop trade relationships within the OECD only.   B. eliminate bribery in all commercial transactions.   C. standardize electrical wave signals.   D. extend their tax regulations beyond their borders.

 

93.	Two good places to begin country-level research are the websites of the: A. CIA and UN.   B. UN and WTO.   C. BIAC and CIA.   D. specific country’s government and OECD.

 

94.	Which country does not belong to the OECD? A. Belgium   B. France   C. Japan   D. China

 

95.	The most serious recent challenge to the EU has been: A. the recent financial crisis.   B. the arrest of the IMF’s Strauss-Kahn.   C. immigration-provoked social unrest.   D. weather changes that have resulted in rising sea levels and warmer temperatures.

 

 

Essay Questions

96.	Discuss the observation made recently by an undergraduate philosophy major that “the major international institutions are concerned with keeping the rich countries rich, at the expense of the poorer ones.”

 

97.	Given what you have read about institutional theory, comment on the quote from William Inge, former dean of St. Paul’s, London: “Every institution not only carries with it the seeds of its own dissolution, but prepares the way for its most hated rival.”

 

98.	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.

 

99.	Economic integration agreements are nice for the insiders, such as the United States, Mexico, and Canada with NAFTA, but they stand in the way of WTO progress because they violate basic guidelines of the WTO. Agree or disagree.

 

100.	Describe the impact of the EU on a non-EU firm.

 

 

Chapter 03 International Institutions from an International Business Perspective Answer Key

 

 

True / False Questions

1.	As discussed in the chapter, institutions are organizations constructed to create jobs for government employment initiatives. FALSE Institutions are organizations constructed to achieve a common goal that function to “provide stability and meaning to social life.”

 

AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explain the importance of international institutions to business decision makers and their firms. Topic Area: International institutions

 

2.	New institutional theory suggests that institutions be understood as collections of rules and codes of conduct that limit behavior. TRUE New institutional theory suggests that institutions be understood as a collection of rules (as in rules of the game) that limit behavior.

 

AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe the various types of institutions; drawing on institutional theory. Topic Area: International institutions

 

3.	One of the significant differences between formal and informal institutions is how they gain compliance. TRUE Compliance is one of the major differentiators between formal and informal institutions. Refer To: Figure 3.1, Institutions: Characteristics

 

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe the various types of institutions; drawing on institutional theory. Topic Area: International institutions

 

4.

Informal cognitive institutions are not important to international managers because such managers localize their hiring, and so they can draw on local talent. FALSE Informal cognitive institutions are important for international managers because these institutions use shared schema to define reality, and the international manager needs to understand that local reality.

 

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe the various types of institutions; drawing on institutional theory. Topic Area: International institutions

 

5.	International institutions provide nations the opportunity to build multilateral solutions, and thus make significant contributions to international stability. TRUE The example in the text is that of China and the United States.

 

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explain the importance of international institutions to business decision makers and their firms. Topic Area: International institutions

 

6.

The United Nations operates with voluntary agreements, so it is essentially an informal institution. TRUE Voluntary agreements constitute a majority of UN activities, so it is an informal institution, given the text discussion. There are exceptions: Peacekeeping forces at times act as formal institutions. Refer To: Figure 3.1, Institutions: Characteristics

 

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe the various types of institutions; drawing on institutional theory. Topic Area: United Nations