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Eae 200: Economics Of Global Business Question Paper
Eae 200: Economics Of Global Business
Course:Bachelor Of Economics
Institution: Kenyatta University question papers
Exam Year:2012
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
ECONOMICS
EAE 200: ECONOMICS OF GLOBAL BUSINESS
DATE: Thursday 29th March 2012
TIME: 2.00 – 4.00 p.m.
INSTRUCTIONS
Answer Question ONE and any other TWO Questions.
Q.1) (Compulsory)
(a)
Differences between the following pairs of terms as used in Economics of Global
Business.
(i)
Market and Competitive drivers of globalization.
(2 marks)
(ii)
Global markets and Global industry.
(2 marks)
(iii)
Strategic choice and Entry strategy alternatives
(2 marks)
(iv)
Social obligation and Business ethics
(2 marks)
(v)
Risk aversion and Perverse financial liberalization
(2 marks)
(b)
“Being good is for business” . Discuss.
(10 marks)
(c)
Two firms A and B that are engaged in global business must decide on a pricing
policy for a new product. Each firm knows that the rival firm will introduce a
similar competing product. Because Firm A’s product is expected to enter the
market slightly sooner than Firm B’s, Firm A announces its prices firs. Firm A
can choose one of the following three prices: USD 1.00, USD 1.35, or USD 1.65. Firm B will
reveal its price later. Because it is second to market, its possible points are two:
USD 0.95 and USD 1.30. The payoffs of the firms, which represent profits are as shown
below.
Page 1 of 2
Firm B’s Pricing
Policy
Firm A’s Pricing
USD 0.95
USD 1.30
Policy
USD 1.00
1,-1
-1,1
USD 1.35
-1,1
1,-1
USD 1,65
-2,5
-3,2
(i)
Is there any dominated strategy(s) for each firm? If yes, which one(s)? If
no why not?
(4 marks)
(ii)
what is the optimal strategy for each firm?
(6 marks)
Q.2) (a)
State and explain the characteristics of multinational corporations. (10 marks)
(b)
Explain how political economy and global business environment can affect the
operations and management of multinational corporations.
(10 marks)
Q.3) (a)
What are the economic and political arguments for regional economic integration?
Given these arguments, why don’t we see more substantial examples of
integration in the world economy?
(10 marks)
(b)
What effect is creation of a single market and single currency within the East
African community likely to have on competition within the East African
countries. Why?
(10 marks)
Q.4) (a)
Under what conditions is it ethically defensible to outsource production to the
developing world where labour costs are lower when such actions also involve
laying off long-term employees in the firm’s home country?
(10 marks)
(b)
Explain how economic system may affect global business operation. (10 marks).
Q.5) (a)
Distinguish between financial and currency crises.
(4 marks)
(b)
Explain how contagion may have contributed to Asian financial
crisis.
(6 marks)
(c)
Explain the dynamics of economic integration.
(10 marks)
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