UZC2 Global Economics for Managers Version 3
Practice exam for Western Governors University WGU Exams under Western Governors University Exams (College Exams). 5 sample questions.
Sample Questions
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Question 1
What is deadweight cost?
Correct Answer: B
Rationale: Deadweight cost, also known as deadweight loss, is a net loss of economic efficiency that occurs when the equilibrium for a good or service is not Pareto optimal. Tariffs create inefficiency by distorting market prices and reducing trade volume, leading to a loss of consumer and producer surplus that is not captured by any other party. The first option describes an anti-dumping tariff. The third option describes opportunity cost. The fourth option describes a subsidy.
Rationale: Deadweight cost, also known as deadweight loss, is a net loss of economic efficiency that occurs when the equilibrium for a good or service is not Pareto optimal. Tariffs create inefficiency by distorting market prices and reducing trade volume, leading to a loss of consumer and producer surplus that is not captured by any other party. The first option describes an anti-dumping tariff. The third option describes opportunity cost. The fourth option describes a subsidy.
Question 2
What is the definition of globalization?
Correct Answer: A
Rationale: Globalization is broadly defined as the process of interaction and integration among people, companies, and governments worldwide. It involves the increasing interconnectedness of national economies and the growing interdependence of countries through cross-border trade, investment, technology, and flows of information and culture. The other options are specific outcomes or aspects of globalization but are not its core definition.
Rationale: Globalization is broadly defined as the process of interaction and integration among people, companies, and governments worldwide. It involves the increasing interconnectedness of national economies and the growing interdependence of countries through cross-border trade, investment, technology, and flows of information and culture. The other options are specific outcomes or aspects of globalization but are not its core definition.
Question 3
What does the term resource mobility describe?
Correct Answer: B
Rationale: Resource mobility is a key assumption in many economic models, particularly those related to international trade. It refers to the ease with which factors of production (like labor and capital) can be reallocated from one industry to another within an economy. This concept is central to theories like the Heckscher-Ohlin model. The first option describes a trade surplus. The third describes free trade. The fourth describes mercantilism.
Rationale: Resource mobility is a key assumption in many economic models, particularly those related to international trade. It refers to the ease with which factors of production (like labor and capital) can be reallocated from one industry to another within an economy. This concept is central to theories like the Heckscher-Ohlin model. The first option describes a trade surplus. The third describes free trade. The fourth describes mercantilism.
Question 4
What are costs to home countries of foreign direct investment? Choose two.
Correct Answer: B,E
Rationale: Foreign Direct Investment (FDI) can lead to capital outflow from the home country as firms invest financial resources abroad. This can potentially reduce domestic investment. FDI can also result in the loss of intellectual property if proprietary technology or knowledge is transferred to foreign operations and not adequately protected. Reduced standard of living and job loss are more commonly cited as costs to *host* countries. Loss of sovereignty and cultural disintegration are broader concerns not directly tied to the economic definition of FDI costs.
Rationale: Foreign Direct Investment (FDI) can lead to capital outflow from the home country as firms invest financial resources abroad. This can potentially reduce domestic investment. FDI can also result in the loss of intellectual property if proprietary technology or knowledge is transferred to foreign operations and not adequately protected. Reduced standard of living and job loss are more commonly cited as costs to *host* countries. Loss of sovereignty and cultural disintegration are broader concerns not directly tied to the economic definition of FDI costs.
Question 5
In which situation is the contender strategy appropriate for responding to MNEs?
Correct Answer: D
Rationale: The contender strategy is used by domestic firms facing high pressure to globalize from multinational enterprises (MNEs). This strategy involves leveraging transferable competitive assets (those that can be applied effectively in foreign markets) to compete with MNEs on a global scale. The other scenarios describe different strategies: extender (low pressure, transferable assets), defender (low pressure, customized assets), and dodger (high pressure, customized assets).
Rationale: The contender strategy is used by domestic firms facing high pressure to globalize from multinational enterprises (MNEs). This strategy involves leveraging transferable competitive assets (those that can be applied effectively in foreign markets) to compete with MNEs on a global scale. The other scenarios describe different strategies: extender (low pressure, transferable assets), defender (low pressure, customized assets), and dodger (high pressure, customized assets).