Download WGU C211 OA GLOBAL ECONOMICS FOR MANAGERS DETAILED PREPARATION PACK 2026 and more Exams Finance in PDF only on Docsity!
WGU C211 OA GLOBAL ECONOMICS FOR
MANAGERS DETAILED PREPARATION PACK
โ Foreign market entries types. Answer: Non-equity and equity โ Non-equity. Answer: Reflects relatively smaller commitments to overseas markets. Determines firms MNE status. โ Equity. Answer: indicative of relatively larger, harder-to-reverse commitments. Determines firms MNE status. โ How do institutions reduce uncertainty?. Answer: Establish "rules of the game" that economic players play by. A standard to follow in order to survive and prosper. By signaling which conduct is legitimate and which is not, institutions constrain the range of acceptable actions. โ Regulatory pillar. Answer: The coercive power of governments (laws, regs, rules) โ Normative pillar. Answer: Values, beliefs, and actions of other relevant players (norms, cultures, ethics)
โ Cognitive pillar. Answer: The internalized, taken-for-granted values and beliefs that guide behavior. (beliefs between right/wrong) โ Formal institution. Answer: One that include laws, regulations and rules โ Informal institution. Answer: One that includes norms, cultures and ethics โ What core propositions lie at the root of the institution based view on global business?. Answer: (1) managers and firms rationally pursue their interests and make choices within institutional constraints (bounded rationality) (2) in situations where formal constraints are unclear or fail, informal constraints play a larger role in reducing uncertainty and providing constancy to managers and firms (personal relationships and connections) โ The institution based view global business is grounded upon. Answer: The dynamic interaction between institutions and firms, and considers firm behaviors as the outcome of such an interaction.
โ How do civil, common and theocratic laws compare?. Answer: Relative to civil law, common law has more flexibility because judges have to resolve specific disputes based on their interpretation of the law. Civil law has less flexibility because judges only have the power to apply the law. โ Property right. Answer: The legal rights to use an economic resource and to derive income and benefits from it. Can be used as collateral for starting a firm; not as common in developing countries, therefore hindering economic growth. โ Intellectual property right. Answer: Rights associated with the ownership. They primarily include rights associated with patents, copyrights, and trademarks. โ Market economy. Answer: One that is characterized by the "invisible hand" of market forces-all factors of production should be privately owned. โ Command economy. Answer: One that is defined by a government taking all factors of production to be government-owned or state- owned, and all supply, demand, and pricing are planned by the government.
โ Mixed economy. Answer: One has elements of both a market economy and a command economy. It boils down to the relative distribution of market forces versus command forces. โ Indifference curve. Answer: A curve that shows consumption bundles that give the consumer the same level of satisfaction (i.e. combinations of pizza and Pepsi with which the consumer is equally satisfied.) โ Four properties of an indifference curve. Answer: (1) Higher indifference curves are preferred to lower ones. People usually prefer to consume more goods rather than less. (2) Indifference curves are downward sloping. The slope of an indifference curve reflects the rate at which the consumer is willing to substitute one good for the other. (3) Indifference curves do not cross. (4) Indifference curves are bowed inward. The slope of an indifference curve is the marginal rate of substitutionโthe rate at which the consumer is willing to trade off one good for the other. โ Marginal rate of substitution.. Answer: The rate at which the consumer is willing to trade off one good for the other (i.e. how much Pepsi the consumer requires to be compensated for a one-unit reduction in pizza consumption)
โ Formula to calculate marginal cost. Answer: Change in total cost divided by change in quantity โ If Dave's company has a total cost of $100 when quantity output is 5, and a total cost of $115 when quantity output is 6, what is the marginal cost of producing the 6th unit?. Answer: $ โ Total cost is made of two types of costs, what are they?. Answer: Fixed and Variable. โ How does a firm determine to shut down in the short-run? What rule characterizes this?. Answer: If the revenue that it would earn from producing is less than its variable costs of production. P<AVC (Price is less than Avg Variable Cost) โ Market structure characterized as being "price takers". Answer: Competitive markets โ Price taker. Answer: One who must accept the price as the market determines โ When a market is characterized as being a price taker, what fundamental shape does the demand curve for this market take?. Answer: Horizontal line.
โ Demand curve for a perfectly competitive firm. Answer: Horizontal line โ Demand curve for a monopolistic market. Answer: Downward- sloping โ What does "downward" sloping with regards to a demand curve mean?. Answer: The monopoly has to accept a lower price if it wants to sell more output. โ Where do firms with market power determine the quantity of product/service they will produce?. Answer: A firm chooses a quantity of output such that marginal revenue equals marginal cost. The firm chooses quantity so that price equals marginal cost. Thus, the firm's marginal-cost curve is its supply curve. โ Primary goal/objective of a firm. Answer: Maximize profit. โ If the firm has price setting capacity, how will they use information about marginal costs and marginal revenues in order to accomplish their primary objective?. Answer: The monopolist's profit-maximizing quantity of output is determined by the intersection of the marginal-revenue curve and the marginal-cost curve.
โ When the Fed buys bonds, what impact does this have on the money supply and aggregate demand?. Answer: After the purchase, these dollars are in the hands of the public. Thus, an open-market purchase of bonds by the Fed increases the money supply. โ When the Fed sells bonds, what impact does this have on the money supply and aggregate demand?. Answer: After the sale, the dollars the Fed receives for the bonds are out of the hands of the public. Thus, an open-market sale of bonds by the Fed decreases the money supply. โ Discount rate. Answer: The interest rate banks pay when borrowing from the Federal Reserve. โ When the Fed reduces the discount rate, what impact will this have on the money supply and the aggregate demand?. Answer: A lower discount rate encourages banks to borrow from the Fed, increasing the quantity of reserves and the money supply. โ When the Fed increases the discount rate, what impact will this have on the money supply and the aggregate demand?. Answer: Higher discount rate discourages banks from borrowing reserves from the Fed, reducing the quantity of reserves in the banking system, which in turn reduces the money supply.
โ Reserve ratio. Answer: The fraction of total deposits that a bank holds as reserves. โ What would the Fed need to do with the reserve ratio in order to increase the money supply and aggregate demand in the economy?. Answer: Decrease the reserve requirements; therefore lowering the reserve ratio. โ What would the Fed need to do with the reserve ratio in order to decrease the money supply and aggregate demand in the economy?. Answer: Increase the reserve requirements; therefore raising the reserve ratio. โ If the Fed uses monetary policy in a way that increases money supply, what effect will this have on interest rates and aggregate demand (consider them separately)?. Answer: Interest rates lower and aggregate demand expands. โ If the government uses fiscal policy to increase government spending what impact will this have on interest rates and aggregate demand?. Answer: Raises interest rates and an increase in aggregate demand. โ If the government uses fiscal policy and cuts taxes, what effect will this have on interest rates and aggregate demand?. Answer: Raises interest rates and an increase in aggregate demand.
โ What other factors might influence the position of the demand curve?. Answer: Price of the good itself, income, price of related goods, tastes, expectations, and number of buyers. โ Numerical value that determines whether or not a product/service is considered price elastic versus inelastic. Answer: 1 - greater than or less than โ Income elasticity. Answer: A measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income. โ Price elasticity of demand. Answer: A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price โ Elastic. Answer: Quantity moves proportionately more than the price (Price increase results in drastically lower demand). โ Inelastic. Answer: Quantity moves proportionately less than the price (Price increase results in slightly lower demand)
โ Unit elastic. Answer: Percentage change in quantity equals the percentage change in price. โ Results from income elasticity. Answer: (1) Necessities, such as food and clothing, tend to have small income elasticities. (2) Luxuries, such as caviar and diamonds, tend to have large income elasticities. โ Cross-price elasticity. Answer: A measure of how much the quantity demanded of one good responds to a change in the price of another good. Computed as the percentage change in quantity demanded of the first good divided by the percentage change in price of the second good. Substitutes=positive cross-price elasticity; complements=negative cross-price elasticity. โ 3 types of elasticity, their equations, purpose and outcomes. Answer: (1) Price elasticity of demand - % chg in Q D / % chg in P (2) Income elasticity - % chg in Q D / % chg in income (3) Cross-price elasticity - % chg in Q D Good 1/% chg in Good #2 P โ In the net, how are price (P) and quantity (Q) changed by a simultaneous increase in demand and supply?. Answer: Price increases and quantity is ambiguous. (Dependent upon how large of a shift in supply/demand)
โ Two primary categories of trade barriers. Answer: Tariffs and Non-Tariff โ If an import tariff is imposed on coconuts that are imported into the U.S., how will this impact the price of coconuts for U.S. consumers?. Answer: Increase the price. โ Why might a government be interested in imposing an import tariff on a good? What benefit would the government derive primarily?. Answer: The tariff will reduce the amount of importans, increase the amount of exports. The primary benefit is that it raises revenue for the government. โ How would imposing an import tariff on cigars impact the domestic production of cigars?. Answer: Quantity increases for exporting at world price. โ If an import tariff on coconuts was removed in the U.S., how would this impact the demand for coconuts by U.S. consumers?. Answer: The demand would increase. โ What would happen to the overall domestic demand for a good if an import tariff were imposed on that good?. Answer: It would increase.
โ How does a tariff generally impact the following entities: consumers, producers, government? Compare the effects between the entities. Answer: Domestic sellers are better off, and domestic buyers are worse off. In addition, the government raises revenue. โ Consumer surplus. Answer: The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it โ Who receives consumer surplus?. Answer: The buyer. โ In relation to the demand curve and price, how is consumer surplus measured?. Answer: The area below the demand curve and above the price measures the consumer surplus in a market. โ Producer surplus. Answer: The amount a seller is paid for a good minus the seller's cost of providing it โ Who receives producer surplus?. Answer: The seller. โ In relation to the demand curve and price, how is producer surplus measured?. Answer: The area below the price and above the supply curve measures the producer surplus in a market.
โ Four components of GDP. Answer: (1) Consumption (2) Investment (3) Govt purchases (4) Net exports โ Why are transfer payments such as social security not counted in government expenditures?. Answer: Because they are not made in exchange for a currently produced good or service. Transfer payments alter household income, but they do not reflect the economy's production. โ Real GDP. Answer: The production of goods and services valued at constant prices, ie. $ โ Nominal GDP. Answer: The production of goods and services valued at current prices, i.e. $1 in 2013, $2 in 2014, etc... โ Reason to measure GDP in real terms. Answer: Because (answer) GDP is not affected by changes in prices, changes in (answer) GDP reflect only changes in the amounts being produced. โ
