WGU C211 - Global Economics for Managers Final
Exam 291 Questions and Answers (100 out of 100)
Already GRADED A
3 views on globalization
Globalization is when you do business internationally
New, Evolutionary, and Pendulum
"New" view on globalization
A force sweeping through the world in recent times.
Which view claims that the phenomenon of globalization was initially driven by the desire of
Western economies to exploit their power through multinational enterprises?
"Evolutionary" view on globalization
A long-run historical evolution since the dawn of human history
"Pendulum" view on globalization
One that swings from one extreme to another from time to time.
Most popular
Foreign Direct Investment (FDI)
Foreign direct investments (FDI) are investments made by one company into another company
that is located in another country.
3 Different political views on FDI
Radical - radical view is hostile to FDI
Free market - free market view calls for minimum or unrestricted government restriction in
FDI. Leads to a win-win situation for both home and host countries.
Pragmatic nationalism - most countries practice pragmatic nationalism, weighing the benefits
and costs of FDI and only using it when benefits outweigh the costs.
What are the benefits to a country receiving Foreign Direct Investment?
,Capital Inflow
Technology Spillover
Advanced Management Know-How
Job creation
What costs exist in a country when they receive Foreign Direct Investment?
1. Loss of Sovereignty (power),
2. Adverse effects on competition (drives domestic firms out of business)
3. Capital outflow
How do resources and capabilities influence the competitive dynamics of a business?
A firm's resources and capabilities must create value compared to its competition.
A firms resources need to bring:
Value, company resources must create value, patents are an example.
Rarity, the rarer, and more desired the more of an advantage it has.
Imitability, how easy is it to imitate your competition?
Organization, some companies are better at answering challenges from competitors.
Classical theories of international trade*
The major theories of international trade that were advanced before the 20th century, they consist
of:
1. Mercantilism,
2. Absolute advantage
3. Comparative advantage
Classic Theory says things don't change, they are static.
How does resource similarity impact competitive dynamics?
Firms with a high degree of similarity are likely to make similar competitive decisions.
(Starbuck's instant coffee & McDonald's iced coffee, if one increases the price because of a
coffee shortage the other will likely also)
What are modern trade theories of international trade?
,Modern theories account for changes in patterns over time whereas classical theories are static.
Modern theories include
(1) Product life cycles,
(2) Strategic trade
(3) National competitive advantage or "Diamond"
What is the classical theory view of international trade regarding change?
Static, not changing
What is absolute advantage?
The economic advantage one nation enjoys that is superior to other nations, which nation is best
at producing a particular good?
Trade can be a win/win
Absolute advantage is achieved when one producer is able to produce a competitive product
using fewer resources, or the same resources in less time.
For example, Smith argued that because of better soil, water, and weather, Portugal enjoyed an
absolute advantage over England in the production of grapes and wines. And England enjoyed an
absolute advantage over Portugal as England produced more wool. If they trade, they would both
benefit. international trade is not a zero-sum game as suggested by mercantilism. It is a win-win
game. there are net gains from trade based on absolute advantage.
Comparative advantage
The ability of an individual or group to carry out a particular economic activity (such as making
a specific product) more efficiently than another activity.
Comparative advantage is an economy's ability to produce a particular good or service at a lower
opportunity cost than its trading partners.
Hypothetically, say that Michael Jordan could paint his house in eight hours. In those same eight
hours, though, he could also take part in the filming of a television commercial which would earn
him $50,000. By contrast, Jordan's neighbor Joe could paint the house in 10 hours. In that same
period of time, he could work at a fast-food restaurant and earn $100.
In this example, Joe has a comparative advantage, even though Michael Jordan could paint the
house faster and better. The best trade would be for Michael Jordan to film a television
commercial and pay Joe to paint his house. So long as Michael Jordan makes the expected
, $50,000 and Joe earns more than $100, the trade is a winner. Owing to their diversity of skills,
Michael Jordan and Joe would likely find this to be the best arrangement for their mutual benefit.
What is mercantilism?
It is the first recorded theory.
A theory that suggests that the wealth of the world (gold/sliver) is fixed and that a nation that
exports more and imports less will be richer.
Mercantilism trade theory states that viewed international trade as a zero-sum game. A nation
becomes richer by exporting more than it imports.
Features of the product life cycle?
The first dynamic theory.
New: production of a new product (such as a TV) that commands a price premium will
concentrate in the United States, which exports to other developed nations.
Maturing Stage: demand and ability to produce growth in other developed nations (such as
Australia and Italy), so it is now worthwhile to produce there.
Standardized: (or commoditized). Thus, much production will now move to low-cost
developing nations, which export to developed nations. In other words, the comparative
advantage may change over time
What is strategic trade theory?
Strategic intervention by governments in certain industries can enhance their odds for
international success.
When a government helps an infant industry until it is large enough to compete on its own.
They do NOT believe that unrestricted free trade is in the best interest of all countries.
What are these industries? They tend to be highly capital-intensive, high entry-barrier industries
in which domestic firms may have little chance without government assistance.
How are supply and demand related to the exchange rate of a country?
Exam 291 Questions and Answers (100 out of 100)
Already GRADED A
3 views on globalization
Globalization is when you do business internationally
New, Evolutionary, and Pendulum
"New" view on globalization
A force sweeping through the world in recent times.
Which view claims that the phenomenon of globalization was initially driven by the desire of
Western economies to exploit their power through multinational enterprises?
"Evolutionary" view on globalization
A long-run historical evolution since the dawn of human history
"Pendulum" view on globalization
One that swings from one extreme to another from time to time.
Most popular
Foreign Direct Investment (FDI)
Foreign direct investments (FDI) are investments made by one company into another company
that is located in another country.
3 Different political views on FDI
Radical - radical view is hostile to FDI
Free market - free market view calls for minimum or unrestricted government restriction in
FDI. Leads to a win-win situation for both home and host countries.
Pragmatic nationalism - most countries practice pragmatic nationalism, weighing the benefits
and costs of FDI and only using it when benefits outweigh the costs.
What are the benefits to a country receiving Foreign Direct Investment?
,Capital Inflow
Technology Spillover
Advanced Management Know-How
Job creation
What costs exist in a country when they receive Foreign Direct Investment?
1. Loss of Sovereignty (power),
2. Adverse effects on competition (drives domestic firms out of business)
3. Capital outflow
How do resources and capabilities influence the competitive dynamics of a business?
A firm's resources and capabilities must create value compared to its competition.
A firms resources need to bring:
Value, company resources must create value, patents are an example.
Rarity, the rarer, and more desired the more of an advantage it has.
Imitability, how easy is it to imitate your competition?
Organization, some companies are better at answering challenges from competitors.
Classical theories of international trade*
The major theories of international trade that were advanced before the 20th century, they consist
of:
1. Mercantilism,
2. Absolute advantage
3. Comparative advantage
Classic Theory says things don't change, they are static.
How does resource similarity impact competitive dynamics?
Firms with a high degree of similarity are likely to make similar competitive decisions.
(Starbuck's instant coffee & McDonald's iced coffee, if one increases the price because of a
coffee shortage the other will likely also)
What are modern trade theories of international trade?
,Modern theories account for changes in patterns over time whereas classical theories are static.
Modern theories include
(1) Product life cycles,
(2) Strategic trade
(3) National competitive advantage or "Diamond"
What is the classical theory view of international trade regarding change?
Static, not changing
What is absolute advantage?
The economic advantage one nation enjoys that is superior to other nations, which nation is best
at producing a particular good?
Trade can be a win/win
Absolute advantage is achieved when one producer is able to produce a competitive product
using fewer resources, or the same resources in less time.
For example, Smith argued that because of better soil, water, and weather, Portugal enjoyed an
absolute advantage over England in the production of grapes and wines. And England enjoyed an
absolute advantage over Portugal as England produced more wool. If they trade, they would both
benefit. international trade is not a zero-sum game as suggested by mercantilism. It is a win-win
game. there are net gains from trade based on absolute advantage.
Comparative advantage
The ability of an individual or group to carry out a particular economic activity (such as making
a specific product) more efficiently than another activity.
Comparative advantage is an economy's ability to produce a particular good or service at a lower
opportunity cost than its trading partners.
Hypothetically, say that Michael Jordan could paint his house in eight hours. In those same eight
hours, though, he could also take part in the filming of a television commercial which would earn
him $50,000. By contrast, Jordan's neighbor Joe could paint the house in 10 hours. In that same
period of time, he could work at a fast-food restaurant and earn $100.
In this example, Joe has a comparative advantage, even though Michael Jordan could paint the
house faster and better. The best trade would be for Michael Jordan to film a television
commercial and pay Joe to paint his house. So long as Michael Jordan makes the expected
, $50,000 and Joe earns more than $100, the trade is a winner. Owing to their diversity of skills,
Michael Jordan and Joe would likely find this to be the best arrangement for their mutual benefit.
What is mercantilism?
It is the first recorded theory.
A theory that suggests that the wealth of the world (gold/sliver) is fixed and that a nation that
exports more and imports less will be richer.
Mercantilism trade theory states that viewed international trade as a zero-sum game. A nation
becomes richer by exporting more than it imports.
Features of the product life cycle?
The first dynamic theory.
New: production of a new product (such as a TV) that commands a price premium will
concentrate in the United States, which exports to other developed nations.
Maturing Stage: demand and ability to produce growth in other developed nations (such as
Australia and Italy), so it is now worthwhile to produce there.
Standardized: (or commoditized). Thus, much production will now move to low-cost
developing nations, which export to developed nations. In other words, the comparative
advantage may change over time
What is strategic trade theory?
Strategic intervention by governments in certain industries can enhance their odds for
international success.
When a government helps an infant industry until it is large enough to compete on its own.
They do NOT believe that unrestricted free trade is in the best interest of all countries.
What are these industries? They tend to be highly capital-intensive, high entry-barrier industries
in which domestic firms may have little chance without government assistance.
How are supply and demand related to the exchange rate of a country?
