Deck 2: Understanding Formal Institutions: Politics, laws, and Economics

Question 1

Institutional framework pertains only to a firm's behavior.

Answer 1

False

Question 2

The regulatory pillar supports both informal and formal institutions.

Answer 2

False

Question 3

Opportunism is a source of transaction costs.

Answer 3

True

Question 4

According to the institution-based view,managers and firms make choices outside institutional constraints.

Question 5

Economic systems are examples of formal institutions.

Question 6

Force majeure is a method of interpreting a statute by understanding the legislative history leading up to the adoption of that statute.

Question 7

An institutional framework is made up of formal and informal institutions governing individual and firm behavior.

Question 8

Civil law uses comprehensive statutes and codes as a primary means to form legal judgments.

Question 9

Cognitive pillar is the coercive power of governments.

Question 10

The laws of a country are part of the formal institution.

Question 11

Firms operating in democracies never confront political risk.

Question 12

Transition economies have static institutions.

Question 13

The common law tradition is mostly spread in non-English speaking countries.

Question 14

Theocratic totalitarianism refers to the monopolization of political power in the hands of one religious party.

Question 15

The normative pillar supports informal institutions.

Question 16

Right-wing totalitarianism refers to the monopolization of power in the hands of a communist party.

Question 17

The values and beliefs of a culture are examples of a formal institution.

Question 18

Proposition 1 of the institution-based view specifically concerns bounded rationality.

Question 19

Totalitarian countries have less political risk than democratic ones.

Question 20

Disabling formal institutes does not affect transaction costs.

Question 21

In a pure market economy,the government only performs functions that the private sector cannot do.

Question 22

Adopting the Paris Convention is required in order to become a signatory country to the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights.

Question 23

The main supportive pillars of the informal institutions are _____.

A) normative and cognitive 
B) regulatory and normative 
C) regulatory, normative, and cognitive 
D) cognitive and regulatory

Question 24

_____ are represented by laws,regulations,and rules.

A) Normative institutions 
B) Sociocultural institutions 
C) Cognitive institutions 
D) Formal institutions

Question 25

Islamic law is the only surviving example of a theocratic legal system that is formally practiced by some existing governments.

Question 26

A copyright is an example of an intellectual property.

Question 27

The cultural school of thought in economic development suggests that rich countries tend to be endowed with natural resources.

Question 28

In which of the following ways do formal institutions regulate trade? 

A) By inducing uncodified ethical beliefs into society 
B) By putting faith in individuals to expose perceived wrong doings 
C) By allowing the cultural beliefs of a society to dictate the terms of trade 
D) By imposing laws that make certain trades unacceptable

Question 29

A mixed economy has elements of both a market economy and a command economy.

Question 30

All Western countries practice the absolute laissez-faire philosophy in trade.

Question 31

In the United States,only 1% of the land is formally registered.

Question 32

Intellectual property rights are enforced though the informal institution system.

Question 33

In private ownership,liquidation of a firm is forced by competition.

Question 34

Trademarks are legal rights awarded by government authorities to inventors of new products or processes.

Question 35

Patents are exclusive rights of firms to use specific names and brands.

Question 36

Contracts in civil law countries tend to be long and detailed compared to contracts in common law countries.

Question 37

The Washington Consensus emphasizes using government intervention over state ownership in business.

Question 38

Which of the following would be considered an example of informal institutions? 

A) Laws 
B) Regulations 
C) Ethics 
D) Rules

Question 39

In a command economy,all factors of production should be government-owned or state-owned.

Question 40

The _____ refers to the coercive power of governments.

A) normative pillar 
B) regulatory pillar 
C) cognitive pillar 
D) informal pillar

Question 41

_____ are exclusive legal rights of authors and publishers to publish and disseminate their work.

A) Patents 
B) Trademarks 
C) Copyrights 
D) Trade secrets

Question 42

Intellectual property specifically refers to _____ property.

A) tangible 
B) intangible 
C) real 
D) moveable

Question 43

The key role of institutions is to _____ in business transactions.

A) reduce uncertainty 
B) increase normative limits 
C) increase opportunism 
D) reduce resource costs

Question 44

_____ refers to a legal system based on religious teachings.

A) Common law 
B) Theocratic law 
C) Civil law 
D) Right-wing totalitarian law

Question 45

Which of the following would be an example of a force majeure defense for a seller? 

A) If the seller decides to stop delivery out of fear of nonpayment 
B) If the customer has already accepted nonconforming goods 
C) If the goods to be delivered are destroyed in an earthquake 
D) If the seller places warranties on the goods

Question 46

The _____ view focuses on the dynamic interactions between the laws,cultures and ethics of a country and a firm,and considers firm behaviors as the outcome of such an interaction.

A) internal strength-based 
B) competency-based 
C) institution-based 
D) resource-based

Question 47

The _____ refers to the internalized,taken for granted values and beliefs that guide individual and firm behavior.

A) normative pillar 
B) regulatory pillar 
C) cognitive pillar 
D) formal pillar

Question 48

Which of the following would be considered an example of intellectual property rights? 

A) Rights associated with ownership of vehicles 
B) Rights associated with ownership of trademarks 
C) Rights associated with ownership of buildings 
D) Rights associated with ownership of business contracts

Question 49

Which of the following is a feature of right-wing totalitarianism? 

A) It does not curtail an individual's right to freedom of expression and organization. 
B) It concentrates power in the hands of one or more religious groups. 
C) It bases its economic policies on communist ideologies. 
D) It does not allow room for political freedom.

Question 50

Which of the following would be considered an example of formal institutions? 

A) Laws 
B) Norms 
C) Cultures 
D) Ethics

Question 51

_____ are exclusive legal rights of firms to use specific names,brands,and designs to differentiate their products from others.

A) Patents 
B) Trademarks 
C) Copyrights 
D) Trade secrets

Question 52

_____ are legal rights awarded by government authorities to inventors of new products.

A) Copyrights 
B) Patents 
C) Trade secrets 
D) Trade marks

Question 53

_____ is a long-standing legal doctrine that excuses firms from living up to the terms of a deal in the event of natural disasters or other calamities.

A) De minimis 
B) Nolo contendere 
C) Force majeure 
D) Travaux préparatoires

Question 54

Which of the following is a proposition of the institution-based view? 

A) Decisions based on bounded rationality should be avoided. 
B) Dependency on informal constraints will always increase the political risks associated with a firm. 
C) When formal constraints are unclear, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms. 
D) Informal constraints always increases transaction costs for the firm.

Question 55

Which of the following is true of the common law system? 

A) It is the oldest legal system in the world. 
B) It has spread to all English-speaking countries and their (former) colonies. 
C) It bases its legal judgment primarily on the dominant religion of the country. 
D) It does not allow interpretations of the law by judges.

Question 56

The TRIPS system was designed to _____.

A) create IP rights that adhered to the norms of individual countries 
B) force firms to enforce IP rights through an informal system 
C) make sure that firms follow theocratic laws 
D) force firms to innovate while strictly adhering to IPR guidelines

Question 57

In which of the following examples can the role of the cognitive pillar be identified? 

A) A firm being exposed after one of its employees turned whistleblower 
B) A firm being punished for corporate espionage by the courts 
C) A firm not being able to sell a certain product in a country due to the prevalent cultural beliefs 
D) A firm outsourcing its jobs

Question 58

A fundamental aspect of _____ is that it effectively conducts global business by providing an individual the right to freedom of expression and organization.

A) communist totalitarianism 
B) right-wing totalitarianism 
C) democracy 
D) theocracy

Question 59

Which of the following is an example of an intellectual property? 

A) Home 
B) Scientist's laboratory 
C) Office 
D) Website

Question 60

Which of the following is true of the civil law system? 

A) It is the most widely distributed legal system around the world. 
B) It originated in England, and was then spread as the legal system for all its former colonies. 
C) It is shaped by precedents and traditions from previous judicial decisions. 
D) It allows judges to interpret the law before making judicial decisions.

Question 61

Private ownership differs from state ownership in that in private ownership _____.

A) maximizing profits is the primary objective of a firm 
B) protecting jobs and minimizing social unrest is the primary objective of a firm 
C) establishing a firm is determined by government officials and bureaucrats 
D) failing firms deemed too big to fail may be supported by taxpayer money indefinitely

Question 62

Identify the basic characteristics of formal and informal institutions.

Question 63

State ownership differs from private ownership in that in state ownership _____.

A) maximizing profits is the sole objective of a firm 
B) management appointments are made by owners and investors based on merit 
C) protecting jobs and minimizing social unrest is the objective of a firm 
D) managers' compensation is determined by competitive market forces

Question 64

Which of the following is true of a command economy? 

A) All factors of production are privately owned. 
B) The government only performs those functions that the private sector cannot perform. 
C) It does not allow private entrepreneurship. 
D) It strictly follows the doctrine of laissez faire.

Question 65

For which of the following types of economies would the factors of production depend on the relative distribution of market forces versus command forces? 

A) Mixed economy 
B) Pure market economy 
C) Strict laissez faire economy 
D) Command economy

Question 66

Compare and contrast civil law,common law,and theocratic law.

Question 67

Describe the differences among the three economic systems.

Question 68

Which of the following is true of the Washington Consensus? 

A) It provided measures that governments can take in order to move toward a command economy. 
B) It listed the bail out procedures that governments could follow in case of a firm's bankruptcy. 
C) It advocated more governmental control in trade. 
D) It advocated the superiority of private ownership over state ownership.

Question 69

What are the two core propositions of the institution-based view?

Question 70

Outline the differences between democracy and totalitarianism.

Question 71

Which of the following is true of a pure market economy? 

A) All factors of production are owned by the government. 
B) All factors of production are privately owned. 
C) It has elements of both a market economy and a command economy. 
D) Its policies are based on religious decree.

Question 72

Which of the following is true of private ownership? 

A) It tends to force firms into liquidation due to high competition. 
B) It empowers the government to determine firm entry. 
C) It allows financing only through nationalized banks. 
D) Its primary objective is protecting jobs and minimizing social unrest.

Question 73

Which of the following is the argument used by proponents of the "cultural" explanation for the difference in economic development across the globe? 

A) That rich countries have a smarter and harder-working population 
B) That rich countries tend to be endowed with natural resources 
C) That rich countries tend to have better market-supporting institutions 
D) That rich countries generally tend to have a democratic style of government

Question 74

Which of the following economies would be characterized as having a laissez faire policy? 

A) Pure market economy 
B) Mixed economy 
C) Command economy 
D) Socialist economy

Question 75

Which of the following is true of private ownership? 

A) Firms are established by entrepreneurs, owners, and investors. 
B) Management appointments are made by government officials and bureaucrats who may also use non-economic criteria. 
C) Firm's objective would be to find a "fair" deal for all stakeholders. 
D) Firms deemed "too big to fail" may be supported by taxpayer dollars indefinitely.

Question 76

How can a firm protect intellectual property rights (IP rights) when countries have different levels of IP rights' enforcement?

Question 77

Define political risk.How is it related to nationalization?

Question 78

What is totalitarianism? Outline the four major types of totalitarian systems.