International Business, Global Edition, 8e (Griffin/Pustay)

Chapter 3 Legal, Technological, Accounting, and Political Environments

1) Statutory law is primarily based on .

A) legislative actions
B) historic precedents
C) moral judgments
D) religious beliefs

2) Common law is primarily based on .

A) actions taken by government legislatures
B) the cumulative wisdom of judges' decisions on individual cases through history
C) a codification of what is and is not permissible
D) the officially established rules governing the faith and practice of a particular religion

3) Civil law is primarily based on .

A) actions taken by local governments
B) the cumulative wisdom of judges' decisions on individual cases through history
C) a codification of what is and is not permissible
D) the officially established rules governing the faith and practice of a particular religion

4) Religious law is primarily based on .

A) legislative actions
B) judges' court decisions
C) codifications of permissible acts
D) officially established rules governing a faith

5) Walton Enterprises, a U.S. firm, has a facility in China. Walton managers in China frequently
complain about the arbitrary rules and decisions implemented by Chinese government
authorities. Such legal unpredictability suggests that China has a system based on law.
A) civil
B) common
C) theocratic
D) bureaucratic

6) Which of the following is a foundation for legal systems?

A) common law
B) the principles of comity
C) administrative law
D) regulatory law

7) is the foundation of the legal systems in the United Kingdom and its former
colonies.
A) Common law
B) Civil law
C) Religious law
D) Bureaucratic law

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8) is based on the cumulative wisdom of judges' decisions on individual cases through
history.
A) Common law
B) Civil law
C) Statutory law
D) Bureaucratic law

9) The foundation of the legal system in India is _ .

A) common law
B) civil law
C) religious law
D) bureaucratic law

10) The foundation of the legal system in China is .

A) common law
B) civil law
C) religious law
D) bureaucratic law

11) is based on a codification of what is and is not permissible.

A) Common law
B) Civil law
C) Statutory law
D) Religious law

12) is law enacted by legislative action.

A) Common law
B) Civil law
C) Statutory law
D) Bureaucratic law

13) The U.S. Freedom of Information Act is an example of .

A) common law
B) civil law
C) statutory law
D) bureaucratic law

14) Civil law originated in biblical times with the .

A) French
B) Greeks
C) Jews
D) Romans

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15) Dawson Enterprises, a U.S. firm, conducts business in Saudi Arabia. The MNE recently
experienced a business dispute with a local firm and was forced to meet the demands of the local
firm without going through due process. Dawson's experience most likely occurred because
Saudi Arabia relies on .
A) civil law
B) common law
C) religious law
D) bureaucratic law

16) In which of the following countries are interest-bearing transactions not allowed?
A) India
B) South Korea
C) Iran
D) Mexico

17) A legal system that lacks due process, lacks appeals procedures, and prohibits banks from
charging interest on loans is most likely based on .
A) common law
B) civil law
C) religious law
D) bureaucratic law

18) In Iran, the religious law is based on the teachings of the .

A) Bible
B) Koran
C) Buddha
D) Napoleonic Code

19) Under which type of legal system can contracts be broken at the whim of those in power?
A) religious law
B) common law
C) bureaucratic law
D) civil law

20) operates under bureaucratic law.

A) England
B) Mexico
C) Iran
D) China

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21) Of the laws that may form the basis for a country's legal system, which one is considered the
riskiest for international businesses?
A) common law
B) religious law
C) bureaucratic law
D) statutory law

22) One country in which a lack of the rule of law appears to be affecting FDI is .
A) Russia
B) Canada
C) Singapore
D) New Zealand

23) Laws regarding are the primary reason the manufacturers in Germany and France
compete on quality rather than price.
A) interest rates
B) worker safety
C) patent liability
D) employee benefits

24) A country restricting access to high-technology goods or withdrawing preferential tariff

treatments is using .
A) embargoes
B) trade limits
C) sanctions
D) extraterritoriality

25) Which of the following is not a sanction?

A) boycotts
B) embargoes
C) high-interest loans
D) removal of preferential tariffs

26) The United States restricts all trade with Cuba. This is an example of a(n) .
A) boycott
B) tariff
C) embargo
D) ban

27) Dual-use products are those that can be used for both and purposes.
A) civilian; military
B) domestic; business
C) wholesale; retail
D) profit; nonprofit

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28) Many countries enforced embargoes against during the 1980s to protest its
apartheid policies.
A) Cuba
B) South Africa
C) China
D) Afghanistan

29) A country that attempts to regulate business activities that are conducted outside its borders
is using .
A) extraterritoriality
B) embargoes
C) sanctions
D) boycotts

30) The is directed against international firms that traffic in the assets of U.S.
companies that were confiscated by the Cuban government in 1959.
A) Bay of Pigs Declaration
B) Anti-Castro Act
C) Helms-Burton Act
D) Freeport McMoRan Doctrine

31) Extraterritoriality refers to .

A) the transfer of ownership of resources from the private to the public sector
B) a government's attempt to regulate business activities outside its borders
C) nationalization of a corporation without fair and appropriate compensation
D) restrictions on the ability of a company to return profits to its headquarters

32) refers to the transfer of ownership of resources from the private to the public
sector.
A) Nationalization
B) Expropriation
C) Federalization
D) Conversion

33) Expropriation is best defined as the .

A) transference of ownership of resources from private to public sector with no compensation
B) transference of ownership from private to public sector with compensation to private owners
for their losses
C) conversion of state-owned property to privately owned property
D) conversion of state-owned property to privately owned property with no compensation

34) Privatization is .
A) the transfer of ownership of resources from the public to the private sector
B) a government's regulation of business activities outside its borders
C) nationalization without compensation
D) nationalization with compensation

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35) Privatization frequently creates opportunities for international businesses because most state-
owned entities are .
A) untaxed
B) well funded
C) unprofitable
D) well staffed

36) In which industry does Mexico restrict foreign ownership?

A) energy
B) broadcasting
C) transportation
D) telecommunications

37) Which of the following best explains why the telecommunications industry has been
privatized in many countries?
A) shrinking ability to employ quality workers
B) international regulations regarding social media
C) citizen demands to separate government and business
D) inability of governments to pay for technological upgrades

38) Randall's Groceries, an international supermarket chain, recently opened a new store in the
Taiwanese market. Which of the following will Taiwanese consumers most likely experience?
A) a decrease in the selection of products
B) more mom-and-pop stores
C) higher standards of quality
D) the loss of local jobs

39) Hawkins Tire is an international chain of discount tire stores. The firm has recently opened a
store in Frankfurt, Germany, where there are already a number of local tire stores. Which of the
following is the most likely negative effect of Hawkins Tire on Frankfurt?
A) failure of local tire stores
B) higher prices for tires
C) lower tire selection
D) poor tire quality

40) The provides that a country will honor and enforce within its own territory the
judgments and decisions of foreign courts with certain limitations.
A) Helms-Burton Act
B) principle of comity
C) arbitration agreement
D) principle of fairness

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41) Which of the following questions is most relevant when resolving an international business
dispute?
A) Which country's law applies?
B) Is the defendant financially solvent?
C) How long should litigation occur?
D) Where does the plaintiff prefer to file the dispute?

42) Which of the following is not one of the conditions required for the principle of comity to
apply?
A) Reciprocity is extended between the countries.
B) The defendant is given improper notice.
C) The foreign court judgment violates domestic statutes or treaty obligations.
D) The foreign court has less stringent punitive damages for corporations.

43) When a company seeks to have a dispute heard in the court system most favorable to its own
interests, the company is .
A) forum shopping
B) adopting the principle of comity
C) rejecting the principle of comity
D) engaging in arbitration

44) is the process by which both parties in a conflict agree to submit their cases to a
private individual or body whose decision they will honor.
A) Negotiation
B) Repatriation
C) Arbitration
D) Resolution

45) provides that the actions of foreign governments against U.S. firms are generally
beyond the jurisdiction of U.S. courts.
A) Arbitration
B) The Helms-Burton Act
C) The principle of comity
D) The Foreign Sovereign Immunities Act of 1976

46) What was the key to the transition from communism to capitalism for Hungary and Poland?
A) technology transfer from FDI
B) investment in infrastructure
C) the adoption of the euro
D) low-cost labor forces

47) In which country are monetary awards in legal disputes usually the highest?
A) United States
B) France
C) United Kingdom
D) Canada

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48) Which of the following would most likely help a country change its technological
environment?
A) more government regulations
B) greater government spending
C) minimum wage increase
D) foreign direct investment

49) The transmittal of technology from one country to another is known as technology
.
A) repatriation
B) transfer
C) drain
D) piracy

50) Which country has the highest rate of software piracy?

A) China
B) Azerbaijan
C) Pakistan
D) Bangladesh

51) The United States frequently has patent flooding disputes with .
A) China
B) Japan
C) Germany
D) Hong Kong

52) In which country do firms publish a social balance sheet detailing their treatment and
compensation of their workforce?
A) France
B) Germany
C) the United Kingdom
D) China

53) Which law was passed to address perceived public accounting problems?
A) Burton-Helms Act
B) Sarbanes-Oxley Act
C) Berne Convention
D) Hays-Douglas Act

54) Accounting reserves .

A) are the basis for assessing a firm's income tax burden
B) record deductions and expenses that are relevant for taxes
C) are important in determining how inventory should be valued
D) record foreseeable future expenses that might affect a firm's operations

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55) is a systematic analysis of the political risks possible in foreign countries.
A) Environmental scanning
B) SWOT analysis
C) Political risk assessment
D) Operating risk analysis

56) Which results in a loss of assets?

A) repatriation
B) confiscation
C) expropriation
D) inflation

57) is the risk associated with the potential for the firm's property to be confiscated or
expropriated.
A) Transfer risk
B) Ownership risk
C) Operating risk
D) Exchange rate risk

58) is the risk associated with the potential for the employees or operations of the firm
to be threatened by changes in laws, environmental standards, tax codes, and terrorism.
A) Transfer risk
B) Ownership risk
C) Operating risk
D) Exchange rate risk

59) is the risk associated with the potential for the government to interfere with the
firm's ability to move funds in and out of the country.
A) Transfer risk
B) Ownership risk
C) Operating risk
D) Exchange rate risk

60) Wilfred Enterprises has foreign operations in Taiwan, India, and China. The firm pays an
annual insurance premium to the Overseas Private Investment Corporation. The firm is most
likely protecting itself from .
A) privatization
B) natural disasters
C) nationalization
D) financial instability

61) Political risk that affects all firms in a country is referred to as .

A) micropolitical risk
B) macropolitical risk
C) inclusive political risk
D) exclusive political risk

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62) is political risk that affects only a specific firm or firms within a specific industry.
A) Inclusive political risk
B) Exclusive political risk
C) Micropolitical risk
D) Macropolitical risk

63) has one of the highest levels of macropolitical risk.

A) Saudi Arabia
B) Chile
C) Venezuela
D) Afghanistan

64) The Unites States limits foreigners to _ ownership of U.S. television and radio
stations.
A) 25%
B) 49%
C) 67%
D) 99%

65) Saudi Arabia's nationalization of the oil industry in the 1970s is an example of .
A) macropolitical risk
B) micropolitical risk
C) transfer risk
D) ownership risk

66) Martin, a manager at an international firm located in China, is required to monitor political
risks for his employer. Which of the following would least likely provide Martin with useful
information?
A) consulting firms
B) embassy officials
C) telecommunication firms
D) home country employees

67) BGL Enterprises, a global firm, operates a facility in Angola. Managers want to reduce the
firm's vulnerability to political risk in Angola. All of the following actions would most likely
accomplish this task except .
A) reducing net investment in the subsidiary
B) purchasing capital equipment outright
C) buying inputs from local suppliers
D) being a good corporate citizen

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68) APO Manufacturing is a U.S. based firm that manufactures electronic equipment. The firm
conducts business with a Japanese electronics firm, and a dispute has arisen between the two
firms regarding intellectual property rights. APO management plans to use arbitration to resolve
the problem. Which of the following best supports this decision?
A) APO's legal department is knowledgeable in global patent laws.
B) APO's legal department expects the principle of comity to apply.
C) APO needs to settle the dispute quickly and inexpensively.
D) APO expects to have record profits during the next year.

69) The IT department at World Airlines has recently improved the airlines' Website to help
facilitate transactions. Now, when repeat customers log on to the Website, their seating
preferences and billing addresses are automatically accessed. For World Airlines customers
located in the European Union, the company will most likely have to .
A) obtain customer permission before using cookies
B) register the domain name of all clients
C) block all pop-ups on the Website
D) provide a secure Web portal

70) Pimlico Steel operates an aluminum refining plant in Jamaica. The contract between Pimlico
and Jamaica requires the corporation to train Jamaican engineers in the latest processes. Jamaica
has most likely required Pimlico to agree to a(n) _ .
A) intellectual property contract
B) electronic copyright system
C) technology transfer
D) direct investment

71) Ellis Electronics is a U.S. firm with operations in Saudi Arabia. Ellis has learned that it may
face expropriation. What would be the most likely result of such actions?
A) higher operating costs
B) loss of future profits
C) higher security costs
D) loss of assets

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