International Business - Political Environment and Economic System

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Questions and Answers

What can happen to domestic companies when they try to cut costs?

They may increase production

They may increase employment

They may fire workers or shift production abroad (correct)

They may decrease prices

According to economic principles, what determines the production of goods in a country?

Comparative advantage (correct)

Government regulation

Total production capacity

Absolute advantage

Why might a government impose a tariff on imported goods?

To protect domestic industries (correct)

To endanger its population

To reduce prices

To increase competition

What is the purpose of the Import Substitution Industrialization strategy?

To foster growth in infant industries Signup and view all the answers

What is a potential criticism of the Import Substitution Industrialization strategy?

It is expensive to subsidize infant industries Signup and view all the answers

What can result from protecting infant industries?

Decreased unemployment and economic growth Signup and view all the answers

What is the term used to describe the uncertainty of conducting business in a foreign country?

Sovereign risk Signup and view all the answers

What is the primary function of an economic system?

To regulate the factors of production Signup and view all the answers

What is the characteristic of a traditional economic system?

Relying on people with very little division of labor or specialization Signup and view all the answers

What is the impact of lack of political stability on a business firm?

It directly impacts the operations of the firm Signup and view all the answers

What are the factors that can affect the working of an international business firm?

Changes in tax rates, policies, and actions of government Signup and view all the answers

What is the definition of an economic system?

A way of organizing and distributing available resources, services, and goods Signup and view all the answers

What is a potential consequence of an industry developing without competition?

Lower quality goods and decreased economic growth Signup and view all the answers

A country imposes a $15 tariff on each pair of shoes imported and a $300 tariff on each computer imported. What type of tariff is this?

Specific tariff Signup and view all the answers

Why are defense industries often protected by developed countries?

Because they are vital to state interests Signup and view all the answers

What is the purpose of an ad valorem tariff?

To protect domestic producers Signup and view all the answers

What is an example of a situation where a country might impose a tariff as a retaliation technique?

If a trading partner has not followed fair trade practices Signup and view all the answers

What is the effect of a 15% ad valorem tariff on a $10,000 vehicle?

The price of the vehicle increases by $1,500 Signup and view all the answers

What is a specific tariff?

A fixed fee levied on one unit of an imported good Signup and view all the answers

What is the purpose of a license in international trade?

To restrict imports Signup and view all the answers

What is a common reason for countries to protect certain industries?

To support industries that are deemed strategically important Signup and view all the answers

What is the effect of an import quota?

It increases prices for consumers Signup and view all the answers

What might happen if a country retaliates against another country's trade practices and the other country agrees to change its practices?

The retaliating country will stop its retaliation Signup and view all the answers

What is a Voluntary Export Restraint (VER)?

A restriction on exports imposed by the exporting country Signup and view all the answers

Which government agency issues permits for the importation of genetically modified plants and plant products?

Bureau of Plant Industry Signup and view all the answers

What is the purpose of a satisfactory risk assessment under Administrative Order No. 8?

To prevent the importation or release of regulated articles into the environment Signup and view all the answers

What replaced Administrative Order No. 8 in 2016?

Joint Department Circular (JDC) Signup and view all the answers

What is the main reason why Administrative Order No. 8 was replaced?

It did not sufficiently cover the principles of risk assessment Signup and view all the answers

What is the contact point for further information on minimum access volumes and current MAV license holders?

USDA Foreign Agricultural Service in Manila Signup and view all the answers

What is the main difference between the Joint Department Circular (JDC) and Administrative Order No. 8?

The JDC provides more public consultation and consideration of socio-economic issues and environmental impacts Signup and view all the answers

Study Notes

Import Regulations for Biotechnology-Derived Products

The Department of Agriculture issued Administrative Order No. 8 (AO 8) on April 3, 2002, regulating the importation and release of genetically modified plants and plant products.
The Bureau of Plant Industry issues permits for the importation of regulated articles and/or combined trait products for contained use, trials, or direct use as food or feed.
No regulated article can be imported or released into the environment without a satisfactory risk assessment.

Joint Department Circular (JDC)

The JDC was approved in March 2016, replacing Administrative Order No. 8 (AO 8).
The JDC requires more public consultation and provides more consideration to socio-economic issues and environmental impacts in risk assessment procedures.

Tariffs and Trade Barriers

Tariffs are levied on products to protect a country's population or industry.
Infant industries can be protected by tariffs, which increase the prices of imported goods and create a domestic market for domestically produced goods.
Types of tariffs include:
- Specific tariffs: a fixed fee levied on one unit of an imported good.
- Ad valorem tariffs: a percentage of the value of the good.
Non-tariff barriers to trade include:
- Licenses: granted to businesses to import certain goods.
- Import quotas: restrictions on the amount of a particular good that can be imported.
- Voluntary export restraints (VER): "voluntary" restrictions created by the exporting country.
- National security barriers: protecting industries deemed strategically important.

Political Environment and Economic System in International Business

Political factors such as changes in tax rates, policies, and government actions can affect the operations of an international business firm.
Lack of political stability in a country directly impacts the operations of a business firm.
Economic systems regulate the factors of production, including land, capital, labor, and physical resources.
Types of economic systems include traditional, which relies on people and has little division of labor or specialization.

Protectionism and Trade Barriers

Protectionist strategies can be used to protect infant industries or national security.
Criticisms of protectionism include the cost of subsidizing the development of infant industries.
Retaliation can be used by countries as a technique to protect their industries or interests.

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Description

Quiz on political environment and economic systems in international business, including political risk, government activities and policies affecting business operations in foreign markets.