IBM 3001 - Market vs. Command Economies

Questions and Answers

How are market economies different from command economies?

In a market economy, prices are set by supply and demand, and consumers allocate expenditures according to their preferences. In a command economy, the government sets prices and production levels.

The study of international business has no relevance for individuals who are going to work in small firms.

False

What are the differences between global trade and global investment?

Global trade occurs when a company exports goods and services to buyers in another country, while global investment involves investing resources in property, plant, equipment, or human capital for business activities outside its home country.

What is the relationship between bribery in a country and economic growth?

Bribery raises costs, increases risks for companies, and acts as a barrier to capital investment, thereby stifling economic growth. Signup and view all the answers

Why might the culture of a country influence the cost of doing business?

Culture includes beliefs, practices, and norms that determine what is acceptable. Cultural issues can drive costs upward and influence consumer value perceptions. Signup and view all the answers

How have changes in technology contributed to globalization of markets and production?

Technological changes in transportation, communication, and the internet have reduced costs and risks of selling and production, enabling real-time communication. Signup and view all the answers

Free market economies stimulate greater economic growth, whereas state-directed economies stifle it.

True Signup and view all the answers

A democratic political system is an essential condition for sustained economic growth.

False Signup and view all the answers

Study Notes

Market vs. Command Economies

Market economy relies on supply and demand for pricing, allowing consumer freedom in expenditures.
High choice availability characterizes market economies, where individuals act in their self-interest.
Command economy is government-driven, owning businesses and controlling pricing, which can lead to poverty.
Government sets production levels and wages in a command economy.

Relevance of International Business Studies

Understanding global markets is crucial for all businesses, including small firms.
Small businesses face competition from larger, more resilient entities and are at risk without international knowledge.
Entrepreneurial small businesses may be particularly vulnerable to market pressures.

Global Trade vs. Global Investment

Global trade involves exporting goods and services to foreign buyers.
Global investment refers to company resources allocated to overseas operations or infrastructure.

Bribery and Economic Growth

Bribes are unrecoverable costs and are illegal under U.S. and many global laws.
Corruption raises company risks, creates barriers to investment, encourages lawlessness, and increases operational costs.
Overall, bribery undermines economic growth and stability.

Cultural Influences on Business Costs

Culture encompasses beliefs, customs, norms, and practices that dictate societal acceptability.
Cultural factors can raise business costs, such as workers' rights and education levels.
The value of products is perceived differently across cultures, affecting pricing strategies.
Global manufacturing can reduce costs, but low wages may indicate low living standards, complicating affordability.
Complex supply chains can also increase costs and diminish value.

Technological Change and Globalization

Advances in transportation and communication have lowered costs and risks tied to global trade.
Real-time communication is now possible, facilitating constant market engagement.
International businesses face challenges including language barriers, legalities, and currency variances.
Observing prices is straightforward, but perceived value can only be deduced through quality assessments.

Economic Growth in Market vs. State-Directed Economies

Free market economies foster entrepreneurship, innovation, and efficiency, driving economic growth.
State-directed economies feature controlled pricing and state ownership, stifling growth potential.
Certain exceptions like excise taxes and monopolies exist, but free markets primarily benefit from unregulated pricing.

Political Systems and Economic Growth

China exemplifies sustained economic growth within a one-party system.
India illustrates that democracy does not automatically lead to consistent economic growth.

Description

This quiz examines the differences between market economies and command economies. It highlights how prices are influenced by supply and demand in a market economy versus government control in a command economy. Ideal for students preparing for the IBM 3001 midterm exam.