1. What is the definition of globalization?
A. The achievement of a one-world market for goods and services
B. The spread of regulatory influence to a greater pool of subjects
C. The development of custom products for each segment of a population
D. The close integration of countries and peoples of the world Correct
Explanation
Globalization refers to the close integration of countries and peoples through increased trade, investment, and cultural exchange, making Choice D correct. Choice A is too narrow, focusing only on a unified market. Choice B is incorrect as it pertains to regulatory expansion, not globalization. Choice C is unrelated, focusing on market segmentation.
2. What is deadweight cost?
A. A government payment to a domestic firm
B. The lost potential from pursuing one activity at the expense of another activity given the alternatives
C. A net loss that occurs in an economy as a result of tariffs Correct
D. A tariff levied on imports that are selling below costs in order to unfairly drive domestic firms out of business
Explanation
Deadweight cost (or loss) is the economic inefficiency caused by market distortions like tariffs, reducing consumer and producer surplus, so Choice C is correct. Choice A refers to subsidies. Choice B describes opportunity cost, not deadweight loss. Choice D refers to dumping, not the resulting economic loss.
3. What does the term resource mobility describe?
A. An economic condition in which a nation exports more than it imports
B. The assumption that a resource removed from one industry can be moved to another Correct
C. The idea that market forces should determine how much to trade with little or no government intervention
D. The idea that governments should actively defend domestic industries from imports and vigorously promote the export of resources
Explanation
Resource mobility refers to the ability to shift resources (e.g., labor, capital) between industries, making Choice B correct. Choice A describes a trade surplus. Choice C refers to free trade principles. Choice D describes protectionism, not resource mobility.
4. What are costs to home countries of foreign direct investment? Choose two
A. Loss of sovereignty
B. Loss of intellectual property Correct
C. Capital outflow Correct
D. Reduced standard of living
E. job loss
F. cultural disintergration
Explanation
Foreign direct investment (FDI) can lead to loss of sovereignty (Choice A) as foreign firms gain influence over local economies, and capital outflow (Choice C) as funds are invested abroad. Choice B (loss of intellectual property) is possible but less common. Choice D (reduced standard of living) is not a direct cost. Choice E (job loss) may occur but is not universal. Choice F (cultural disintegration) is a social concern, not a direct economic cost.
5. In which situation is the contender strategy appropriate for responding to MNEs?
A. There is low industry pressure to globalize and competitive assets are customized to home markets
B. There is high industry pressure to globalize and competitive assets are customized to home markets
C. There is high industry pressure to globalize and competitive assets are transferable abroad Correct
D. There is low industry pressure to globalize and competitive assets are transferable abroad
Explanation
The contender strategy is used when firms face high industry pressure to globalize and have transferable competitive assets, making Choice C correct. Choices A and D indicate low globalization pressure, unsuitable for contenders. Choice B suggests non-transferable assets, limiting global competitiveness.