PA - Political and Economic Forces

Question 1

Regulatory Pillar of Institutions

Answer 1

Represents the coercive power of governments through laws, regulations, and rules. Example: Government-imposed tax laws or trade restrictions.

Question 2

Formal Institutions

Answer 2

Represent laws, regulations, and rules that structure political, economic, and legal interactions. Example: A country’s constitution or commercial law system.

Question 3

Bounded Rationality

Answer 3

Describes making sensible decisions without having complete information. Example: A manager selects a supplier based on past experiences due to lack of full market data.

Question 4

Institution-Based View Proposition

Answer 4

Firms make rational choices within institutional constraints. Example: A company relocates manufacturing to a lower-wage country after local wage laws increase costs.

Question 5

Democracy Characteristics

Answer 5

Democracies prize individual freedoms, allow economic participation by locals and foreigners, and have lower political risk. Example: Foreign firms operating freely in the U.S. under protected legal rights.

Question 6

Common Law

Answer 6

Relies on legal precedents and judicial decisions. Example: A court ruling in the UK referencing earlier similar cases to decide a dispute.

Question 7

Trademark

Answer 7

Legal protection for logos, symbols, and brand identifiers. Example: Nike’s swoosh logo is protected by trademark.

Question 8

Intellectual Property Examples

Answer 8

Includes patents and trademarks, which protect inventions and brand identifiers. Example: Apple’s patented iPhone design and trademarked logo.

Question 9

Laissez-Faire in Market Economy

Answer 9

Market economies are characterized by minimal government interference (laissez-faire approach). Example: Businesses operate freely in the U.S. with limited government control.

Question 10

Private Ownership in Market Economies

Answer 10

Factors of production like land, labor, and capital are owned by individuals or corporations. Example: A privately-owned tech company deciding its production strategy.