Deck 6: The Political Environment: a Critical Concern
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Deck 6: The Political Environment: a Critical Concern
1
Barring Latin America, the risks of confiscation and expropriation have lessened over the last two decades.
True
Explanation: Risks of confiscation and expropriation appear to have lessened over the last two decades (with exceptions in Latin America, particularly Venezuela) because experience has shown that few of the desired benefits materialize after government takeover.
Explanation: Risks of confiscation and expropriation appear to have lessened over the last two decades (with exceptions in Latin America, particularly Venezuela) because experience has shown that few of the desired benefits materialize after government takeover.
2
Nationalistic feelings are directly proportional to the growth of domestic economy.
False
Explanation: Generally, the more a country feels threatened by some outside force or the domestic economy declines, the more nationalistic it becomes in protecting itself against intrusions.
Explanation: Generally, the more a country feels threatened by some outside force or the domestic economy declines, the more nationalistic it becomes in protecting itself against intrusions.
3
The ultimate goal of domestication is to force foreign investors to share more of the ownership, management, and profits with nationals than was the case before domestication.
True
Explanation: The ultimate goal of domestication is to force foreign investors to share more of the ownership, management, and profits with nationals than was the case before domestication.
Explanation: The ultimate goal of domestication is to force foreign investors to share more of the ownership, management, and profits with nationals than was the case before domestication.
4
As a result of the General Agreement on Tariffs and Trade, foreign businesses no longer need to be concerned about the stability or instability of prevailing government policies.
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5
Adherence to the World Trade Organization (WTO) inevitably means the loss of some degree of national sovereignty.
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6
Expropriation and nationalization have often led to nationalized businesses that were efficient, technologically strong, and competitive in world markets.
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7
Risk of violence is not a consideration in assessing the political vulnerability of a multinational company's activities.
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8
Nongovernmental organizations can affect the policy decisions made by governments.
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9
Pressure from nationalist and self-interest groups affect the stability of a government.
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10
International warfare is fast gaining popularity among nations.
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11
Many countries have domestication as a condition for investment.
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12
Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.
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13
Nationalism can take an anti-foreign business bias.
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14
The most severe political risk is domestication.
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15
Political and social activists have no impact on the normal flow of trade.
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16
Price controls are only targeted at nonessential products.
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17
Economically prosperous countries do not display strong nationalistic feelings.
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18
Saudi Arabia permits women to vote if they are at least 18 years old and married or 21 years old if single.
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19
Foreign investment can be perceived as a threat to sovereignty.
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20
Political sanctions are the most effective means of achieving the goal of forcing a country to accept the demands of the boycotting country.
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21
Monarchy, like _____, is a form of government ruled by one.
A) aristocracy
B) dictatorship
C) democracy
D) monopoly
E) oligarchy
A) aristocracy
B) dictatorship
C) democracy
D) monopoly
E) oligarchy
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22
Due to advancements in technology, it is easy to determine if a cyberattack has been launched by a rogue state, a terrorist, or a hacker as a prank.
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23
Which of the following is true of a sovereign state?
A) It is obligated to be a member of the World Trade Organization.
B) Its political and economic systems are determined by the United Nations Development Programme.
C) It enjoys full legal equality with other states.
D) Its territory is governed by the United Nations.
E) It is bounded by external control.
A) It is obligated to be a member of the World Trade Organization.
B) Its political and economic systems are determined by the United Nations Development Programme.
C) It enjoys full legal equality with other states.
D) Its territory is governed by the United Nations.
E) It is bounded by external control.
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24
The ideal political climate for a multinational firm is:
A) a country where international laws do not apply.
B) a country where favors can be purchased easily.
C) a country with a stable and friendly government.
D) a government with absolute power.
E) a government that radically shifts its philosophy.
A) a country where international laws do not apply.
B) a country where favors can be purchased easily.
C) a country with a stable and friendly government.
D) a government with absolute power.
E) a government that radically shifts its philosophy.
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25
Licensing is least effective in situations where the technology is unique and the risk is high.
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26
The ancient Greeks conceived three fundamental forms of government. Which of the following refers to a government ruled by one?
A) Aristocracy
B) Monarchy
C) Democracy
D) Monopoly
E) Oligarchy
A) Aristocracy
B) Monarchy
C) Democracy
D) Monopoly
E) Oligarchy
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27
Which of the following is the top political issue concerning foreign businesses?
A) Demographic profile of political leaders
B) Government policies on infrastructure
C) Economic awareness of political leaders
D) Stability of prevailing government policies
E) Membership of governments in trade treaties
A) Demographic profile of political leaders
B) Government policies on infrastructure
C) Economic awareness of political leaders
D) Stability of prevailing government policies
E) Membership of governments in trade treaties
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28
A single company can directly control or alter the political environment of the country within which it operates.
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29
The principal agency that supports U.S. business abroad is the Department of Commerce (DOC).
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30
_____ refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.
A) Sovereignty
B) Self-governance
C) Ethnocentrism
D) Autocracy
E) Non-interventionism
A) Sovereignty
B) Self-governance
C) Ethnocentrism
D) Autocracy
E) Non-interventionism
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31
As cultural and political scenarios vary so widely across nations, there is absolutely no way to generalize tendencies for products to be politically sensitive.
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32
In the context of international law, a _____ state is independent and free from all external control.
A) bounded
B) sovereign
C) legal
D) liberal
E) neutral
A) bounded
B) sovereign
C) legal
D) liberal
E) neutral
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33
What goal did the G20 nations agree to in the April 2009 agreement that required them to cede some sovereignty?
A) Including all G20 nations in the Security Council
B) Raising oil prices
C) Increasing infrastructure funding
D) Rejecting protectionism
E) Increasing aid to South Africa
A) Including all G20 nations in the Security Council
B) Raising oil prices
C) Increasing infrastructure funding
D) Rejecting protectionism
E) Increasing aid to South Africa
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34
Products that have or are perceived to have an effect on the environment are more likely to be politically sensitive.
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35
Adherence to the WTO inevitably means:
A) a definite increase in import tariffs worldwide.
B) the loss of national security to a large extent.
C) reduction in world trade by at least 70 percent.
D) the loss of some degree of national sovereignty.
E) complete stoppage of foreign direct investments.
A) a definite increase in import tariffs worldwide.
B) the loss of national security to a large extent.
C) reduction in world trade by at least 70 percent.
D) the loss of some degree of national sovereignty.
E) complete stoppage of foreign direct investments.
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36
The Agency for International Development underwrites trade and investments for U.S. firms.
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37
Planned domestication can be profitable and operationally expedient for the foreign investor.
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38
It is illegal for U.S. citizens to pay a bribe unless it is a common practice in the host country.
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39
Which of the following is one of the main political causes of instability in international markets?
A) Varied taxing conventions
B) Differences in economic philosophies
C) Global focus
D) Environmental awareness
E) Trade disputes
A) Varied taxing conventions
B) Differences in economic philosophies
C) Global focus
D) Environmental awareness
E) Trade disputes
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40
Relations between governments and MNCs are generally negative even if the investment made by the MNCs improves the balance of payments by increasing exports or reducing imports.
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41
Which of the following is a common term for a form of government in use today?
A) Protectionism
B) Duopoly
C) Oligopoly
D) Capitalism
E) Oligarchy
A) Protectionism
B) Duopoly
C) Oligopoly
D) Capitalism
E) Oligarchy
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42
If there is a substantial amount of capital leaving a country, which of the following is the country most likely to implement to control the situation?
A) Exchange controls
B) Local-content laws
C) Import restrictions
D) Tax controls
E) Price controls
A) Exchange controls
B) Local-content laws
C) Import restrictions
D) Tax controls
E) Price controls
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43
Which of the following government forms can be most aptly described as a rule by few?
A) Aristocracy
B) Dictatorship
C) Democracy
D) Monopoly
E) Monarchy
A) Aristocracy
B) Dictatorship
C) Democracy
D) Monopoly
E) Monarchy
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44
_____ stem from shortages of foreign currency held by a country.
A) Exchange controls
B) Local-content laws
C) Price controls
D) Tax controls
E) Production costs
A) Exchange controls
B) Local-content laws
C) Price controls
D) Tax controls
E) Production costs
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45
The United States requires that 50 percent of all parts used to construct an automobile in the United States be manufactured in the United States. As a result of this, when Toyota Motor Company built automobile manufacturing plants in Tennessee and Ohio, it faced economic risks associated with _____.
A) exchange controls
B) local-content laws
C) export restrictions
D) tax controls
E) price controls
A) exchange controls
B) local-content laws
C) export restrictions
D) tax controls
E) price controls
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46
In Thailand, it is required that any milk product sold in the country by a foreign company must use the milk produced by Thai dairy farmers. Which of the following economic risks is faced by the international producers of milk products in this situation?
A) Exchange controls
B) Local-content laws
C) Export restrictions
D) Tax controls
E) Price controls
A) Exchange controls
B) Local-content laws
C) Export restrictions
D) Tax controls
E) Price controls
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47
In _____, police and military are not allowed to vote.
A) Croatia
B) Iran
C) Bolivia
D) Saudi Arabia
E) Peru
A) Croatia
B) Iran
C) Bolivia
D) Saudi Arabia
E) Peru
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48
Which of the following countries is the only country to preclude women from voting and appears to be still completely in the dark ages with regards to suffrage?
A) Croatia
B) Iran
C) Bolivia
D) Saudi Arabia
E) Venezuela
A) Croatia
B) Iran
C) Bolivia
D) Saudi Arabia
E) Venezuela
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49
Which of the following is true of domestication?
A) The ultimate goal of domestication is to force domestic investors to share more of the profits with the government.
B) The risk of domestication appears to have decreased over the last two decades.
C) Domestication has always led to more technologically advanced and competitive businesses.
D) Nowadays, countries often require companies to become domesticated as a condition for investment.
E) Domestication refers to the seizing of a company's assets without payment.
A) The ultimate goal of domestication is to force domestic investors to share more of the profits with the government.
B) The risk of domestication appears to have decreased over the last two decades.
C) Domestication has always led to more technologically advanced and competitive businesses.
D) Nowadays, countries often require companies to become domesticated as a condition for investment.
E) Domestication refers to the seizing of a company's assets without payment.
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50
When a government seizes an investment of a foreign investor but some reimbursement for the assets is made, the government follows a process called:
A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.
A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.
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51
Which of the following instances is most likely a manifestation of nationalism?
A) Membership in bilateral trade treaties
B) Call to buy a global counterpart's products
C) Restrictions on imports
D) Removal of tariffs and quotas
E) Focus on global security
A) Membership in bilateral trade treaties
B) Call to buy a global counterpart's products
C) Restrictions on imports
D) Removal of tariffs and quotas
E) Focus on global security
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52
The seizing of a company's assets without payment is called:
A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.
A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.
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53
_____ occurs when host countries gradually cause the transfer of foreign investment to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company's management.
A) Confiscation
B) Expropriation
C) Domestication
D) Democratization
E) Socialization
A) Confiscation
B) Expropriation
C) Domestication
D) Democratization
E) Socialization
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54
When does an expropriated investment become a government-run entity?
A) On democratization
B) On deportation
C) On nationalization
D) On prioritization
E) On socialization
A) On democratization
B) On deportation
C) On nationalization
D) On prioritization
E) On socialization
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55
Which of the following is true of nationalism?
A) The more a country feels threatened by some outside force the less nationalistic the country becomes.
B) A call to "buy our country's products only" is one form of manifestation of national feelings.
C) Nationalist feelings lead to loss of control over foreign investment.
D) The more a country's domestic economy declines, the less nationalistic it becomes.
E) Nationalistic feelings are not prevalent in economically prosperous countries.
A) The more a country feels threatened by some outside force the less nationalistic the country becomes.
B) A call to "buy our country's products only" is one form of manifestation of national feelings.
C) Nationalist feelings lead to loss of control over foreign investment.
D) The more a country's domestic economy declines, the less nationalistic it becomes.
E) Nationalistic feelings are not prevalent in economically prosperous countries.
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56
With which of the following would the phrase "Buy American" be most closely associated?
A) Socialism
B) Communism
C) Nationalism
D) Abstractionism
E) Polarism
A) Socialism
B) Communism
C) Nationalism
D) Abstractionism
E) Polarism
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57
The government in Chile recently informed Clint Travis' company that his retail grocery chain in Chile would have to be gradually turned over to the people of Chile by the year 2050 as it is a foreign company in Chile. Additionally, starting next year 50 percent of the board of directors of the Chilean operation of the company must be Chileans. Which of the following political risk actions is Mr. Travis' company facing in Chile?
A) Confiscation
B) Expropriation
C) Domestication
D) Patronization
E) Socialization
A) Confiscation
B) Expropriation
C) Domestication
D) Patronization
E) Socialization
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58
With respect to the political risk that can be faced by a company seeking to invest abroad, which of the following is most severe?
A) Confiscation
B) Expropriation
C) Domestication
D) Exchange controls
E) Local-content laws
A) Confiscation
B) Expropriation
C) Domestication
D) Exchange controls
E) Local-content laws
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59
According to ancient Greeks, which of the following refers to a fundamental government form with the rule by many?
A) Aristocracy
B) Dictatorship
C) Democracy
D) Monopoly
E) Monarchy
A) Aristocracy
B) Dictatorship
C) Democracy
D) Monopoly
E) Monarchy
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60
_____ is an intense feeling of state pride and unity, an awakening of a country's people to pride in their country.
A) Nepotism
B) Absolutism
C) Fascism
D) Nationalism
E) Polarism
A) Nepotism
B) Absolutism
C) Fascism
D) Nationalism
E) Polarism
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61
Brian is attempting to forecast political instability and help his company's management identify and evaluate political events and their potential influence on current and future international business decisions. Brian is engaged in:
A) political risk assessment.
B) political confiscation.
C) democratization.
D) arbitration.
E) risk expropriation.
A) political risk assessment.
B) political confiscation.
C) democratization.
D) arbitration.
E) risk expropriation.
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62
Which of the following statements is true of political sanctions?
A) Political sanctions normally control and rectify situations within a nation.
B) Political sanctions are generally unsuccessful.
C) Political sanctions are illegal.
D) The United Nations encourages boycotts as a means of settling disputes.
E) The use of political sanctions is the most effective way to increase world trade.
A) Political sanctions normally control and rectify situations within a nation.
B) Political sanctions are generally unsuccessful.
C) Political sanctions are illegal.
D) The United Nations encourages boycotts as a means of settling disputes.
E) The use of political sanctions is the most effective way to increase world trade.
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63
Which of the following strategies to minimize political vulnerability and risk has the advantage of engaging the power of several investors and banks in the host country whenever any kind of government takeover or harassment is threatened?
A) Joint ventures
B) Licensing
C) Expanding the investment base
D) Sole proprietorship
E) Political bargaining
A) Joint ventures
B) Licensing
C) Expanding the investment base
D) Sole proprietorship
E) Political bargaining
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64
Why do terrorism experts predict multinational businesses will be targeted by terrorists more frequently?
A) They impose export controls on the underdeveloped nations.
B) They are the major cause for political sanctions against Arab nations.
C) They are less well defended than government targets.
D) They destroy and pollute the environment.
E) They are subterfuge for espionage agents.
A) They impose export controls on the underdeveloped nations.
B) They are the major cause for political sanctions against Arab nations.
C) They are less well defended than government targets.
D) They destroy and pollute the environment.
E) They are subterfuge for espionage agents.
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65
Taxes must be classified as a(n) _____ risk when used as a means of controlling foreign investments.
A) political
B) social
C) ignorable
D) environmental
E) harmless
A) political
B) social
C) ignorable
D) environmental
E) harmless
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66
Which of the following is more likely to be subjected to price control?
A) Leather garments
B) Mobile phone accessories
C) Aspirin and antacids
D) Camcorders and lenses
E) Ceramic tiles
A) Leather garments
B) Mobile phone accessories
C) Aspirin and antacids
D) Camcorders and lenses
E) Ceramic tiles
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67
Which of the following forms of terrorism is most likely to use the Internet to inflict damage?
A) Germterrorism
B) Bioterrorism
C) Cyberterrorism
D) Ecoterrorism
E) Narcoterrorism
A) Germterrorism
B) Bioterrorism
C) Cyberterrorism
D) Ecoterrorism
E) Narcoterrorism
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68
Since the government of Nigeria is strapped for cash, it has decided to tax all foreign investments (such as oil production equipment) by up to 40 percent of the appraised value. The Nigerian government has found that this is the handiest and quickest means of finding operating funds. The economic risk in discussion here is:
A) exchange controls.
B) local-content laws.
C) tax restrictions.
D) tax controls.
E) price controls.
A) exchange controls.
B) local-content laws.
C) tax restrictions.
D) tax controls.
E) price controls.
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69
"Slammer," "Melissa," and "Goner worm" are all examples of:
A) viruses damaging the Internet.
B) politically sensitive products.
C) third-world diseases.
D) hackers intent on attacking multinational businesses.
E) new video games espousing Internet crime.
A) viruses damaging the Internet.
B) politically sensitive products.
C) third-world diseases.
D) hackers intent on attacking multinational businesses.
E) new video games espousing Internet crime.
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70
Stopping or refusing to trade with another nation for political reasons is called:
A) monopolizing.
B) boycotting.
C) confiscation.
D) democratization.
E) expropriation.
A) monopolizing.
B) boycotting.
C) confiscation.
D) democratization.
E) expropriation.
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71
Which of the following represents a new and powerful tool of PSAs?
A) Political sanctions
B) Monetary barriers and trade embargoes
C) The Internet and cellphones
D) Local-content laws and questionnaires
E) Export controls
A) Political sanctions
B) Monetary barriers and trade embargoes
C) The Internet and cellphones
D) Local-content laws and questionnaires
E) Export controls
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72
Which of the following strategies can be effective in forestalling or minimizing the effect of a total takeover of a multinational corporation's holdings by a foreign government?
A) Confiscation
B) Sole proprietorship
C) Expanding the investment base
D) Advertising
E) Leasing
A) Confiscation
B) Sole proprietorship
C) Expanding the investment base
D) Advertising
E) Leasing
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73
In North Korea, foreign investors or producers are required to sell products at prices stated by the North Korean government rather than letting market value and demand determine the prices. This implies that there is severe application of _____.
A) exchange controls
B) local-content laws
C) import restrictions
D) tax controls
E) price controls
A) exchange controls
B) local-content laws
C) import restrictions
D) tax controls
E) price controls
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74
Which of the following is an NGO (nongovernmental organization)?
A) Central Intelligence Agency
B) Peace Corps
C) Millennium Challenge Corporation
D) Oxfam
E) FedEx
A) Central Intelligence Agency
B) Peace Corps
C) Millennium Challenge Corporation
D) Oxfam
E) FedEx
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75
Price controls are used during inflationary periods to:
A) control the cost of living.
B) restrict exports to foreign countries.
C) negotiate trade contracts favoring the host country.
D) encourage imports.
E) collect taxes on foreign investments.
A) control the cost of living.
B) restrict exports to foreign countries.
C) negotiate trade contracts favoring the host country.
D) encourage imports.
E) collect taxes on foreign investments.
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76
Juliet is concerned with the potential for political harassment when her company enters a new international market. To reduce the risk of political harassment, she is most likely to consider using _____ to enter the market.
A) externally produced products
B) a smaller investment base
C) foreign technology
D) joint ventures
E) the threat of sanctions
A) externally produced products
B) a smaller investment base
C) foreign technology
D) joint ventures
E) the threat of sanctions
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77
In terms of political risk, which of the following poses the greatest threat to international marketers?
A) Newer environmental regulations approved by global trade bodies
B) Change of economic policies
C) Exchange rate fluctuations affecting margins
D) The possibility of the government actually failing
E) Membership or withdrawal of membership of the government in trade blocs
A) Newer environmental regulations approved by global trade bodies
B) Change of economic policies
C) Exchange rate fluctuations affecting margins
D) The possibility of the government actually failing
E) Membership or withdrawal of membership of the government in trade blocs
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78
Which of the following is a strategy that multinational corporations use to minimize political vulnerability and risk?
A) Expropriation
B) Sanctions
C) Buyouts
D) Confiscation
E) Licensing
A) Expropriation
B) Sanctions
C) Buyouts
D) Confiscation
E) Licensing
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79
Relations between governments and MNCs are generally positive if the investment:
A) increases the volume of imports.
B) uses globally produced resources.
C) transfers capital, technology, and/or skills.
D) brings in more number of foreign nationals.
E) decreases the volume of exports.
A) increases the volume of imports.
B) uses globally produced resources.
C) transfers capital, technology, and/or skills.
D) brings in more number of foreign nationals.
E) decreases the volume of exports.
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80
Meteora Inc. is planning to enter the Kenyan market by establishing a mobile phone manufacturing operation in Kenya. Meteora is most likely to have a positive relationship with Kenyan government through its investment if it:
A) uses locally produced resources.
B) imports phone components from China.
C) establishes an R&D center in California and has all its technology patented there.
D) ensures that its middle and upper management are made of expatriates.
E) bargains for a tax holiday for the next five financial years.
A) uses locally produced resources.
B) imports phone components from China.
C) establishes an R&D center in California and has all its technology patented there.
D) ensures that its middle and upper management are made of expatriates.
E) bargains for a tax holiday for the next five financial years.
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