C211 Global Economics for Managers Practice Questions - Set 4 - Part 2

Correct Answer: a) Producer surplus + Consumer surplus

Total surplus in an economy is calculated as the sum of consumer surplus and producer surplus, representing the overall welfare generated by market transactions.

Correct Answer: b) Portfolio investment

Portfolio investment refers to investment in foreign securities, such as stocks and bonds, without acquiring controlling interest in the companies.

Correct Answer: c) Competitor analysis

Competitor analysis refers to the process of anticipating and responding to rivals' actions by analyzing their strengths, weaknesses, and strategies.

Correct Answer: b) Product life cycle theory

Product life cycle theory accounts for changes in trade patterns as products move through different stages of their life cycle, from introduction to maturity and eventual decline.

Correct Answer: a) Capital requirement

A capital requirement is a government regulation that sets a minimum amount of capital that banks must hold as a safeguard against financial risks.

Correct Answer: c) Market economy

A market economy is an economic system in which the production and distribution of goods and services are determined by supply and demand, with minimal government intervention.

Correct Answer: c) Market equilibrium

Market equilibrium is the point at which the quantity supplied equals the quantity demanded, resulting in a stable price.

Correct Answer: c) Horizontal FDI

Horizontal FDI occurs when a firm replicates its home country activities at the same stage of the value chain in a foreign country, such as manufacturing or sales.

Correct Answer: d) Attack

An attack is an initial set of competitive actions undertaken by a firm to gain an advantage over rivals, such as entering a new market or launching a new product.

Correct Answer: c) Currency risk

Currency risk is the potential for financial loss due to fluctuations in foreign exchange rates, which can affect firms engaged in international business.

Correct Answer: a) Inferior goods

Inferior goods are those for which demand decreases as consumer income rises, as consumers shift to higher-quality alternatives.

Correct Answer: a) Price ceiling

A price ceiling is a government-imposed upper limit on the price of a good, intended to prevent prices from rising too high and becoming unaffordable.

Correct Answer: b) Patent

A patent grants inventors exclusive rights to profit from their inventions, protecting their intellectual property for a specified period.

Correct Answer: b) Trade deficit

A trade deficit occurs when a country imports more goods and services than it exports, leading to a negative balance of trade.

Correct Answer: b) Gross Domestic Product (GDP)

GDP measures the total value added by resident firms, households, and governments operating within a country's borders.

Correct Answer: c) Collusion

Collusion occurs when firms cooperate to reduce competition by dividing markets and fixing prices, often leading to higher prices for consumers.

Correct Answer: a) Comparative advantage theory

Comparative advantage theory suggests that nations should specialize in industries where they have a relative efficiency advantage, allowing them to trade with other countries for goods they produce less efficiently.

Correct Answer: c) Willingness to pay

Willingness to pay refers to the maximum amount a buyer is willing to spend on a good or service, representing the value they place on the product.

Correct Answer: c) Free market view

The free market view advocates for minimal government intervention in trade, allowing market forces such as supply and demand to determine the outcomes.

Correct Answer: b) Property rights

Property rights refer to the legal rights to use a resource, such as land or intellectual property, and to derive income from its use.