C211 Global Economics (UZC2)

1. What is the definition of globalization?

• The achievement of a one-world market for goods and services
• The spread of regulatory influence to a greater pool of subjects
• The development of custom products for each segment of a population
• The close integration of countries and peoples of the world

2. What is deadweight cost?

• A net loss that occurs in an economy as a result of tariffs
• A tariff levied on imports that are selling below costs in order to unfairly drive domestic firms out of business
• A government payment to a domestic firm
• The lost potential from pursuing one activity at the expense of another activity, given the alternatives

3. What does the term resource mobility describe?

• The assumption that a resource removed from one industry can be moved to another
• The idea that market forces should determine how much to trade with little or no government intervention
• The idea that governments should actively defend domestic industries from imports and vigorously promote the export of resources
• An economic condition in which a nation exports more than it imports

4. What are costs to home countries of foreign direct investment? Choose two.

• Reduced standard of living
• Loss of intellectual property
• Cultural disintegration
• Capital outflow
• Loss of sovereignty
• Job loss

5. In which situation is the contender strategy appropriate for responding to MNEs?

• There is low industry pressure to globalize, and competitive assets are customized to home markets.
• There is low industry pressure to globalize, and competitive assets are transferable abroad.
• There is high industry pressure to globalize, and competitive assets are transferable abroad.
• There is high industry pressure to globalize, and competitive assets are customized to home markets.

6. When confronting MNEs, the extender strategy centers on what?

• Engaging in rapid learning and then expanding overseas
• Leveraging local assets in areas in which MNEs are weak
• Cooperating through joint ventures (JVs) with MNEs and sell-offs to MNEs
• Leveraging homegrown competencies abroad

7. What is one of the elements of the Porter Diamond in the theory of national competitive advantage of industries?

• Domestic demand conditions
• Firm opportunity costs
• Trade deficits
• Foreign supply markets

8. What is purchasing power parity?

• The movement of investors in the same direction at the same time
• The idea that a country’s exchange rate is an indicator of socioeconomic well-being
• The gain from taking advantage of inefficient exchange rates
• A theory suggesting that the price for identical products sold in different countries must be the same in the absence of trade barriers

9. What is one of the two major exchange rate policies?

• Discount rate
• Floating rate
• Fiscal rate
• Matched rate

10. What is one of the three primary types of foreign exchange transactions?

• Straddles
• Balanced transactions
• Hedges
• Forward transactions

11. What is one of the three primary strategies that nonfinancial companies use to cope with currency risks?

• Using foreign dealers for their goods
• Reducing currency liabilities
• Keeping low inventories
• Strategic hedging

12. What is an example of a company that is market-seeking?

• A company searching for a location where the cost of unskilled labor is low
• A company searching for a location where there is a high interest in camping supplies
• A company searching for a location where rocks and minerals can be mined
• A company searching for a location where a specific type of plastic is low-cost and readily available

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