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| Section | Objectives |
|---|---|
| Competency 3: Economic Decision-Making by Firms and Customers | - Consumer Behavior (Budget Constraint, Indifference Curves) - Firm Behavior Under Different Market Structures (Perfect Competition, Monopoly, Oligopoly) |
| Competency 2: Political and Economic Forces | - Market Economy vs. Command Economy - Property Rights and the Rule of Law |
| Key Topics Across All Competencies | - Supply and Demand Shifts - Foreign Direct Investment (FDI) Impacts - Global Business Strategies and Porter's Framework - International Trade Policies (Tariffs, Quotas) - Currency Appreciation and Depreciation - Elastic vs. Inelastic Goods |
| Competency 1: International Trade and Currency Exchange | - Currency Exchange Rate Determination - Impact of Interest Rates on Financial Flows and Exchange Rates - Introduction to International Trade Theories |
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NEW QUESTION # 131
What are represented by informal institutions?
Answer: D
Explanation:
Informal institutions are unwritten social constraints that shape behavior, including norms, customs, values, traditions, and ethics. Option B is correct because ethics represents an informal guide to behavior rather than a formally codified legal requirement. Informal institutions reduce uncertainty by helping people understand what is socially acceptable, trustworthy, or legitimate in a particular society. They matter greatly in global business because managers may comply with formal laws but still fail if they ignore local customs or ethical expectations. Rules and regulations are usually formal when written and enforced by legal authorities. Written laws are clearly formal institutions. Informal institutions are enforced mainly through social approval, reputation, relationships, and cultural expectations rather than courts or government penalties.
NEW QUESTION # 132
Direct exports have which advantage?
Answer: B
Explanation:
InGlobal Economics for Managers,direct exportingallows firms tocapitalize on economies of scale in production in the home country, making option B correct.
By concentrating production domestically, firms can achieve lower average costs, maintain quality control, and leverage existing facilities and expertise. Direct exporting avoids the fixed costs of establishing foreign production facilities.
Options A, C, and D are incorrect because exporting typically involves transportation costs, limited distribution control, and exposure to exchange rate risk.
Thus, option B correctly identifies a key advantage of direct exporting.
NEW QUESTION # 133
Which strategy for responding to multinational enterprises is appropriate in a situation in which there is low industry pressure to globalize and competitive assets are customized to home markets?
Answer: B
Explanation:
The defender strategy is appropriate when industry pressure to globalize is low and the firm's competitive assets are customized to the home market. In this situation, the firm does not face strong pressure to expand globally, and its strengths are mainly local, such as domestic customer relationships, local distribution knowledge, local brand reputation, or familiarity with national regulations. Option C is correct because a defender focuses on protecting its home-market position by exploiting local advantages that multinational enterprises may find difficult to copy. A contender strategy fits high globalization pressure with home-market- customized assets. An extender strategy would involve using transferable capabilities abroad, and a dodger strategy usually involves cooperating with or selling to multinational firms when pressure is high and assets are weak. Therefore, defender is the correct response.
NEW QUESTION # 134
A country has experienced a decrease in inflation. What is the effect on the country's currency exchange rate?
Answer: C
NEW QUESTION # 135
What is an example of a company that is market-seeking?
Answer: D
Explanation:
InGlobal Economics for Managers, amarket-seeking companyis one that invests in or enters a foreign location primarily toserve local or regional customers, making option C the correct answer. Market-seeking behavior is driven by demand-side considerations rather than cost or resource availability.
Option C describes a firm searching for a location where there ishigh consumer interest in camping supplies
, which directly reflects a desire to access and serve a specific market. Such firms are motivated by factors like market size, growth potential, consumer preferences, and proximity to customers. Market-seeking firms often establish foreign subsidiaries, sales offices, or production facilities to adapt products to local tastes and respond quickly to demand.
Option A describes aresource-seekingfirm, focused on obtaining low-cost or specialized inputs. Option B also reflects resource-seeking behavior, specifically in extractive industries. Option D describes acost-seeking (efficiency-seeking)firm that locates production in regions with low labor costs.
Global Economics for Managersclassifies foreign direct investment motives into market-seeking, resource- seeking, efficiency-seeking, and strategic asset-seeking. Market-seeking investment is particularly common in consumer goods and service industries, where understanding local preferences is critical for success.
For managers, recognizing market-seeking motives helps guide decisions about location, marketing strategy, and product adaptation. Thus, option C accurately illustrates a market-seeking company.
NEW QUESTION # 136
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