1.Which factor affects economic globalization?**
- Similar languages spoken
- Limited access to ports of entry
- **Absence or presence of favorable trade policies**
- Educational opportunities in a foreign country
**Explanation**: Economic globalization is heavily influenced by trade policies that either facilitate or hinder the flow of goods, services, and investments across borders. Favorable trade policies, such as reduced tariffs or trade agreements, directly impact the ease of international trade, making this the most relevant factor.
2.In which stage of the five stages of becoming a global company does the company transfer the full production process to a single low-cost location?**
- Creation of new market
- Product specialization
- **Value chain reengineering**
- Value chain disaggregation
**Explanation**: The stage where a company transfers its full production process to a single low-cost location is known as value chain reengineering. This involves restructuring the company's operations to optimize costs, often by relocating production to areas with lower labor or operational expenses, which aligns with the goal of becoming a global company efficiently.
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**Question 3: What is a drawback of the global expansion of a multinational corporation?**
- Lower economies of scale
- Regulatory structure
- **Language barriers**
- Decreased competitiveness
**Explanation**: A significant drawback of global expansion for a multinational corporation is language barriers. These can complicate communication, marketing, and operations across different regions, leading to misunderstandings, inefficiencies, and challenges in maintaining a cohesive corporate culture.
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**Question 4: A small group of business owners has captured control of a nation’s natural resources to expand their wealth and political influence. Which type of system is impacting this country?**
- Anarchy
- Monarchy
- Democracy
- **Oligarchy**
**Explanation**: The scenario describes an oligarchy, where a small group of individuals—in this case, business owners—hold significant power and control over a nation’s resources and political influence. This system is characterized by the concentration of power in the hands of a few, often at the expense of broader societal interests.
**Question 5: Which economic system allows for the most innovative and rapid response to global consumer needs?**
- Mixed
- Traditional
- **Market**
- Command
**Explanation**: A market economic system is driven by supply and demand, where businesses compete to meet consumer needs quickly and efficiently. This competition fosters innovation and rapid adaptation to global consumer demands, unlike command or traditional systems, which are more rigid, or mixed systems, which may have varying degrees of flexibility.
**Question 6: Political stability is a key factor for governments to attract foreign investment in their country. Which political system offers the most political stability?**
- Oligarchy
- **Democracy**
- Dictatorship
- Anarchy
**Explanation**: Democracy is generally considered the political system that offers the most political stability for attracting foreign investment. It provides a framework for rule of law, transparent governance, and mechanisms for peaceful transitions of power, which are attractive to investors seeking a predictable and secure environment.
**Question 7: What is a characteristic of a command economy?**
- Exchanges are mainly made by bartering.
- **Labor is allocated by the state.**
- Innovation is rewarded.
- Prices are regulated by the market.
**Explanation**: In a command economy, the government or state has significant control over economic activities, including the allocation of resources and labor. This distinguishes it from market economies, where prices are set by supply and demand, or traditional economies, which may rely on bartering.
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**Question 10: How does the World Trade Organization (WTO) promote transparency among its member nations?**
- **By mandating that changes in trade policies be reported to member nations**
- By allowing the other member nations to vote on a change in trade agreements
- By coordinating trade negotiations with other nations with the WTO
- By requiring trade proposals to be submitted to the WTO for approval
**Explanation**: The WTO promotes transparency by requiring member nations to report changes in trade policies, ensuring that all members are informed and can respond accordingly. This fosters openness and predictability in global trade, which is a core principle of the WTO.
---
**Question 11: Critics of the IMF claim that loan conditionality can worsen a country’s political and economic situation. Which condition could the IMF impose in exchange for financial resources?**
- Regulation of industrial production
- Centralization of government
- **Privatization of nationalized industries**
- Imposition of tariffs
**Explanation**: The IMF often imposes conditions like privatization of nationalized industries to promote economic efficiency and reduce government spending. However, critics argue this can lead to job losses and social unrest, potentially worsening a country’s political and economic situation.
---
**Question 12: A country decides to restrict international steel transactions within its borders to promote its own steel companies. How does this affect global business?**
- It creates a trade surplus for the national economy.
- It develops free trade policies with strategic partners.
- **It imposes import restrictions on competing nations.**
- It reduces export opportunities for domestic steel companies.
**Explanation**: By restricting international steel transactions, the country is effectively imposing import restrictions (e.g., tariffs or quotas) to protect its domestic steel industry. This limits competition from foreign steel producers, impacting global business by reducing their market access.
---
**Question 13: Which outcome can result from countries establishing new trade agreements?**
- **Increased average wages**
- Increased unemployment
- Decreased political cooperation
- Decreased customer loyalty
**Explanation**: New trade agreements often lead to increased economic activity, which can boost demand for labor and result in increased average wages. While other outcomes like unemployment or decreased political cooperation are possible, they are less directly tied to the establishment of trade agreements.
---
**Question 14: Two countries of similar economic status are trading similar goods. Which form of trade are these two countries using?**
- **Intra-industry**
- Fair
- Global
- Specialization
**Explanation**: Intra-industry trade occurs when countries of similar economic status trade similar goods, often within the same industry (e.g., cars for cars). This is common among developed nations and differs from specialization, where countries trade different goods based on comparative advantage.
---
**Question 15: What is the impact of countervailing duties levied by a country’s government?**
- It makes foreign producers more competitive domestically.
- **It brings an imported product’s value closer to the normal value.**
- It decreases the price of imported goods.
- It increases the costs of production for domestic producers.
**Explanation**: Countervailing duties are imposed to counteract subsidies provided by foreign governments to their producers, which can artificially lower the price of imported goods. These duties aim to level the playing field by bringing the imported product’s price closer to its normal market value.
---
**Question 16: Why would a country choose to implement trade protectionism?**
- To restrict international trade
- To protect firms that export goods from foreign laws
- **To restrict domestic trade**
- To protect imported goods from domestic laws
**Explanation**: Trade protectionism is typically implemented to restrict international trade, often to protect domestic industries from foreign competition. However, the correct answer in this context appears to be a misphrasing; the intended answer should likely be "to restrict international trade," as "restrict domestic trade" does not align with the typical goals of protectionism.
---
**Question 17: What is a voluntary export restriction?**
- An export tariff made by the exporting country
- **A restriction of exports by the exporting country**
- A restriction of imports by the importing country
- An import tariff made by an importing country
**Explanation**: A voluntary export restriction (VER) is when an exporting country agrees to limit the quantity of goods it exports to another country, often to avoid harsher trade measures like tariffs or quotas from the importing country. This is distinct from tariffs or import restrictions imposed by the importing country.
**Question 18: Which gain results from a country imposing a quota on an imported good?**
- The domestic government gains tax revenues.
- **A domestic producer has increased sales.**
- A foreign producer has increased sales.
- Foreign prices fall.
**Explanation**: Imposing a quota on an imported good limits the quantity of that good entering the country, reducing competition for domestic producers. This typically leads to increased sales for domestic producers as consumers have fewer foreign options, benefiting local businesses.
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**Question 19: What should host countries do to increase foreign direct investments (FDIs) in their nations?**
- Rely on the investing firm to improve local conditions for domestic businesses
- Reduce tax incentives and loans
- **Improve workforce education and job training**
- Restrict certain geographic areas to export businesses
**Explanation**: To attract foreign direct investment (FDI), host countries need to create an appealing environment for investors. Improving workforce education and job training enhances the quality of the labor force, making the country more attractive to foreign companies looking for skilled workers, thus encouraging FDI.
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**Question 20: What is a benefit of foreign direct investment (FDI)?**
- Improved centralization within the market region
- Foreign ownership of companies in strategically important industries
- Increased profits with countries of politically aligned agendas
- **Inflow of capital for the global and local economy**
**Explanation**: A key benefit of FDI is the inflow of capital it brings to both the global and local economy. When foreign companies invest directly in a country, they inject money into the local economy, which can be used for infrastructure, job creation, and economic growth, benefiting both the host country and the global market.
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**Question 21: A multinational corporation headquartered in Country A has invested in many industries located in Country B. How can Country A influence government policy in Country B?**
- By advocating for trade agreements
- By lobbying the International Monetary Fund (IMF)
- By forcing allies to leave the country
- **By threatening market withdrawal**
**Explanation**: A multinational corporation from Country A, with significant investments in Country B, can influence government policy by threatening market withdrawal. This leverage comes from the economic impact such a withdrawal could have on Country B, including job losses and reduced economic activity, prompting the government to adjust policies to retain the corporation’s presence.
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**Question 22: A multinational corporation from Country A has established its businesses in Country B. It wants to reduce the risk of competition from local enterprises in Country B. Which component allows this corporation to act as a monopoly in Country B?**
- Fair trade
- Trade sanction
- Embargo
- **Patent**
**Explanation**: A patent grants the corporation exclusive rights to a product or process, preventing local enterprises in Country B from producing or selling the same product. This legal protection can allow the corporation to act as a monopoly in that market by eliminating competition for the patented product or technology.
**Question 23: What are trade blocs?**
- Unilateral trade agreements that restrict trade between two or more countries
- Restrictions made by one country on products from another country
- **Trade agreements between two or more countries that create opportunities for trade**
- Global arrangements that prevent trade between countries
**Explanation**: Trade blocs are agreements between countries to reduce trade barriers, such as tariffs, and promote trade among members. Examples include the European Union or NAFTA, which create opportunities for trade by fostering economic cooperation.
---
**Question 24: The North American Free Trade Agreement (NAFTA) was formed by Canada, the United States, and Mexico. Its purpose was to make trade between the three countries easier and more profitable. How did NAFTA accomplish this purpose?**
- By minimizing wage differentials between member countries
- By updating the laws to make it legal to sell products between member countries
- **By eliminating tariffs and licensing requirements**
- By changing regulations so trucks are approved to drive between member countries
**Explanation**: NAFTA aimed to facilitate trade by removing barriers, primarily through the elimination of tariffs and licensing requirements. This allowed goods to flow more freely between the member countries, reducing costs and increasing profitability.
---
**Question 26: The transportation manager of a large company presents a proposal to the senior management of the company to invest in electric vehicles. The manager mentions that this is aligned with the larger goal to keep the global temperature increase below 2°C. Which international trade agreement is being referenced by the manager?**
- CEPA Accord
- **Paris Agreement**
- Kyoto Protocol
- WTO Act
**Explanation**: The Paris Agreement is an international treaty focused on combating climate change, with a key goal of limiting global temperature rise to below 2°C above pre-industrial levels. Investing in electric vehicles aligns with this goal by reducing carbon emissions, making it the correct reference.
---
**Question 27: Which group is charged with monitoring environmental practices of industry and enforcing United States federal environmental statutes and regulations?**
- Department of the Interior
- Paris Agreement
- **Environmental Protection Agency**
- United Nations Environment Programme
**Explanation**: The Environmental Protection Agency (EPA) is the U.S. federal agency responsible for enforcing environmental laws and regulations, including monitoring industry practices to ensure compliance with statutes like the Clean Air Act or Clean Water Act.
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**Question 28: An environmental consultant is advising a large oil drilling business in the United States. The consultant reminds the business of its obligations to create and maintain conditions so a healthful environment can be ensured for all people. Which specific act of the United States government is being referenced by the consultant?**
- **National Environmental Policy Act**
- Paris Environmental Agreement Act
- Taft-Hartley Act
- Kyoto Environmental Protocol Act
**Explanation**: The National Environmental Policy Act (NEPA) requires federal agencies and businesses to assess the environmental impact of their actions and ensure a healthful environment. It fits the consultant’s focus on maintaining environmental conditions in the U.S.
---
**Question 29: An organization hires migrant workers to pick strawberries. Recruiters provide no employment contract to the workers, and the workers are unable to leave the host country. Which labor convention is being violated by the organization?**
- Geneva
- Worst Forms of Child Labour
- Maritime Labour
- **Domestic Workers**
**Explanation**: The situation describes migrant workers in a vulnerable position without contracts and unable to leave, which aligns with violations of the Domestic Workers Convention (ILO Convention No. 189). This convention addresses the rights of domestic workers, including migrants, ensuring fair treatment and freedom of movement.
**Question 39:**
A global company wants to adapt its products to markets in countries that are less wealthy.
Which marketing strategy element should it use?
- Reputation
- **Glocalization**
- Standardization
- Sustainability
**Explanation:** Glocalization is the correct choice because it involves adapting a company's global products to fit the local needs and preferences of specific markets, such as less wealthy countries. This strategy balances global branding with local customization, making products more accessible and appealing in diverse economic contexts.
**Question 40:**
A company is trying to enter a market where there are strategic barriers preventing it from entering. The company decides to sell the right to use its intellectual property to locally operated companies in exchange for a fee.
What is the term used for this arrangement?
- Joint venture
- Subsidiary
- Franchising
- **Licensing**
**Explanation:** Licensing is the correct answer because it involves a company granting permission to another entity to use its intellectual property (like patents or trademarks) for a fee. This allows the company to enter the market indirectly, bypassing strategic barriers, while the local company handles operations.
**Question 41:**
A company would like to enter a foreign market with the lowest risk possible to its financial position.
Which type of arrangement should this company use to minimize this risk?
- **Joint venture**
- Licensing agreement
- Vertical integration
- Horizontal integration
**Explanation:** A joint venture is the best choice here because it involves partnering with a local company, sharing both the risks and costs of entering the foreign market. This reduces the financial burden on the entering company compared to other methods like vertical or horizontal integration, which require more direct investment.
**Question 42:**
A company wants to reduce its operational expenses. The chief executive officer (CEO) decides to relocate the company’s factory to a country where labor and materials are cheaper.
Which strategy did the CEO use?
- Achieving international expansion
- **Using efficient sourcing**
- Gaining market growth
- Developing emerging markets
**Explanation:** Using efficient sourcing is the correct answer because relocating the factory to a country with cheaper labor and materials directly focuses on reducing operational costs through better resource acquisition. This strategy prioritizes cost efficiency over market expansion or growth.
**Question 43:**
In select grocery stores, customers can buy made-to-order coffee beverages from Company A when entering the store. The businesses are independent but share the cost of the space.
Which entry strategy is this an example of?
- **Joint venture**
- Exporting
- Strategic alliance
- Licensing
**Explanation:** A joint venture is the correct choice because the two independent businesses (Company A and the grocery store) are collaborating by sharing the cost of the space to offer a service. This partnership allows both to benefit while maintaining their independence, fitting the definition of a joint venture.
**Question 44:**
Which advantage is associated with using a standardization strategy for global marketing?
- Market growth
- **Lower costs**
- Greater adaptability
- Market saturation
**Explanation:** Lower costs is the correct answer because a standardization strategy involves using the same marketing approach globally, which reduces expenses related to customizing products or campaigns for different markets. This leads to economies of scale and cost savings.
**Question 45:**
A company is seeking to expand into a new market and prefers an entry strategy that will have a direct operating presence in a foreign country.
Which entry strategy should it pursue?
- Franchising
- Licensing
- Joint venture
- **Subsidiary**
**Explanation:** A subsidiary is the correct choice because it involves the company establishing a direct presence in the foreign country by setting up a wholly-owned operation. Unlike franchising or licensing, a subsidiary gives the company full control and a direct operating presence.
**Question 46:**
Individual A recently accepted a promotion to a foreign subsidiary of a U.S. company, and Individual B has been asked to help with the preparation for the foreign assignment. Individual B describes the strong bonds the people have in that country, especially in relation to group identity.
Which country, according to Hofstede’s framework of culture, is Individual B discussing with Individual A?
- Hungary
- **Guatemala**
- Canada
- Australia
**Explanation:** Guatemala is the correct answer because, according to Hofstede’s cultural dimensions, it scores high on collectivism, meaning people have strong bonds and prioritize group identity over individualism. Hungary, Canada, and Australia tend to lean more toward individualism in Hofstede’s framework.
**Question 48:**
Which human resource strategy should a company implement to maintain intercultural communications?
- Mandate cultural compensation
- **Offer language training**
- Offer cultural training
- Hire adaptable managers
**Explanation:** Offering language training is the best choice because effective intercultural communication often hinges on overcoming language barriers. While cultural training and adaptable managers are helpful, language training directly addresses a key obstacle to clear communication across cultures.
**49.** A major global technology company staffs the leadership roles and key positions in its overseas offices with expatriates from the home country. What is an advantage of this company's approach to workforce management?
- Adjusting managerial decisions to local conditions
- Engaging the employees of the local office more effectively
- Increasing diversity to help with employee motivation
- **Maintaining control and consistency of messaging**
**Explanation:** Using expatriates from the home country ensures that the company’s core values, strategies, and messaging remain consistent across global offices. This approach helps maintain control over operations and aligns overseas offices with the headquarters’ vision, which is a key advantage in this context.
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**50.** A major global technology company headquartered in France assigns a senior manager from its India operations to head a manufacturing plant in the United States. What is a disadvantage of this approach to workforce management?
- Lack of diversity in the workforce
- Decreased effectiveness of repatriation
- **Higher travel costs and investment in skills training**
- Lack of global perspective and integration
**Explanation:** Assigning a manager from India to the U.S. involves significant travel costs and likely requires additional investment in skills training to adapt to the new environment, such as cultural or operational training. This can be a financial and logistical disadvantage compared to hiring locally or using someone already familiar with the U.S. context.
---
**51.** What should a company do to successfully conduct business in China?
- Develop personal relationships with high-level business executives
- **Develop personal relationships with local government officials**
- Maintain a level of dominance and superiority throughout a business dealing
- Invest in relationships between equal parties with an exchange of favors
**Explanation:** In China, business success often hinges on "guanxi," a system of building networks and relationships, particularly with local government officials who wield significant influence over business operations, permits, and regulations. Establishing these relationships is critical for navigating the Chinese business landscape effectively.
---
**52.** A large global automotive manufacturer would like to make a large-scale capital investment decision in production facilities to achieve revenue growth. Which type of economy should the automotive manufacturer focus on to achieve this goal?
- Mature economies
- Agricultural economies
- Underserved economies
- **Large emerging economies**
**Explanation:** Large emerging economies, such as those in the BRICS countries (Brazil, Russia, India, China, South Africa), offer significant growth opportunities due to their expanding middle class, increasing demand for vehicles, and developing infrastructure. These markets are ideal for achieving revenue growth through large-scale investments in production facilities.
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**53.** A company known for introducing novel products outsources production to reduce costs and increase revenue. Which risk is associated with this focus on cost reduction?
- Access to world-wide capabilities
- Costs associated with regulation
- **Loss of innovation**
- Lean production improvement
**Explanation:** Outsourcing production to reduce costs can lead to a loss of innovation, as the company may become detached from the production process, limiting opportunities for in-house experimentation and development of new ideas. This is a significant risk for a company known for novel products.
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**54.** A company decides to offshore its customer relations department and makes the current staff train the new offshored staff. Which type of risk does the company need to mitigate?
- Loss of innovation
- Higher-than-expected cost of capital
- Loss of organizational trust
- **Higher-than-expected transaction costs**
**Explanation:** Offshoring and training new staff can lead to higher-than-expected transaction costs, including expenses related to coordination, communication, and potential inefficiencies during the transition. These costs can arise from cultural differences, time zone challenges, and the effort required to train the new team.
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**55.** While outsourcing can have significant benefits, there are also several potential risks. What risks are associated with outsourcing?
- Loss of property, loss of organizational trust, and higher than expected transactions cost
- Loss of control, loss of property, and loss of tax protection
- Loss of innovation, loss of tax protection, and higher than expected transactions cost
- **Loss of control, loss of innovation, and loss of organizational trust**
**Explanation:** Outsourcing often leads to a loss of control over processes, as they are managed externally. It can also result in a loss of innovation due to reduced in-house involvement in production or services, and a loss of organizational trust, as employees may feel insecure about job stability or the company’s commitment to its workforce.
**Question 59:**
A company relocated its production facilities to a graduated tax country even though the upper-level corporate rates were higher than similar neighboring countries. Which situation encouraged the company to take this action?
- The company income fell in a lower tax bracket, which is less than the neighboring countries.
- The company anticipated a quick growth strategy where profits could be increased quickly.
- The company used higher transfer pricing in a country where the production facilities are located.
- **The company had production facilities located in the host country with a value-added corporate tax.**
**Explanation:** A graduated tax system means tax rates increase with income, but the presence of a value-added corporate tax in the host country can provide benefits like tax credits or deductions, making it more attractive for the company despite higher upper-level rates.
**Question 60:**
Why might a firm choose to raise money by issuing stock in a foreign market instead of in its home market?
- To be more visible in emerging markets
- To keep foreign exchange rates constant
- **Because debt financing is not available in its home stock market**
- Because it would have to pay the money back in its home market
**Explanation:** Issuing stock in a foreign market can be a strategic move if debt financing (like loans or bonds) is unavailable in the home market, allowing the firm to access capital without the burden of repayment that comes with debt.
**Question 62:**
Why might a company make a fronting loan to its subsidiary in a different country?
- **To pay a lower interest rate than when transferring the money to the subsidiary**
- To pay a flat instead of variable income tax rate
- To keep the subsidiary from operating in an illegal tax haven
- To bypass local laws restricting the amount of fund transfers abroad
**Explanation:** A fronting loan involves a parent company depositing funds with a bank, which then lends to the subsidiary. This can secure a lower interest rate for the subsidiary compared to direct transfers, which might face higher costs or restrictions.
**Question 63:**
Why might a smaller company looking to expand overseas consider a country with a high maximum corporate tax rate?
- **The country uses tax brackets.**
- The country outlaws transfer pricing.
- The country has lower sales taxes.
- The country uses a flat tax system.
**Explanation:** A country with tax brackets means that smaller companies might fall into lower tax brackets, paying less tax than the maximum rate, which could be more favorable compared to a flat tax system where all companies pay the same rate regardless of income.
**Question 64:**
A company is hoping to expand globally, but the population the company is targeting is unable to operate technology well despite having full access to computers and the internet. Which stage of the digital divide must this company manage in order to make this global expansion successful?
- Usability
- Economic
- Geographic
- **Empowerment*
**Explanation:** The digital divide has stages: access, usability, and empowerment. Since the population already has access to technology but struggles to use it effectively, the company needs to focus on empowerment—ensuring the population can meaningfully use technology to benefit from the company’s offerings.
**Question 65:**
Why do companies use supercomputers?
- To reduce the number of human resources employees
- To provide after-sale customer service support
- To save costs on marketing automation and sales
- **To conduct research and calculations quickly**
**Explanation:** Supercomputers are designed for high-performance computing, enabling companies to perform complex research and calculations at a much faster rate than standard computers, which is their primary use in business contexts.
**Question 66:**
Which tool provides the ability to record and evaluate operational and cost scenarios by connecting to computers and equipment pertaining to a company’s operation?
- Desktop publishing program
- Graphics and presentation program
- **Management information system**
- Augmented reality system
**Explanation:** A management information system (MIS) is designed to collect, process, and analyze data from various sources, including computers and equipment, to provide insights into operational and cost scenarios, aiding decision-making.
**Question 67:**
A global company needs to have all of its information management systems operate in an integrated manner across all departments and locations. Which strategy should be used for this purpose?
- Supplier relationship management
- Transaction monitoring system
- Customer relationship management
- **Enterprise resource planning system**
**Explanation:** An enterprise resource planning (ERP) system integrates various business processes and information systems across departments and locations, ensuring seamless operation and data sharing for a global company.
**Question 68:**
To increase privacy protection for personally identifiable information, the European Union passed the General Data Protection Regulation (GDPR) in May 2016. How does this regulation protect personal information?
- **Users must explicitly grant permission for companies to use their personal information.**
- Companies must make an effort to determine the age of those accessing their website.
- Users must agree to an acceptable use policy.
- Companies collecting personal information are encouraged to create a privacy policy and post it on their website.
**Explanation:** The GDPR’s core principle is that individuals must give explicit consent for their personal data to be used, ensuring transparency and control over how companies handle their information.
**Question 70:**
Which privacy protection does the Children’s Online Privacy Protection Act offer to children under the age of 13?
- Organizations must obtain parental consent to use personal data for users under the age of 13.
- Organizations cannot collect personal information from children under the age of 13.
- Organizations must create a privacy policy regarding the use of children’s personal information and post it on their website.
- **Organizations must verify the age of their users before collecting personal information.**
**Explanation:** The Children’s Online Privacy Protection Act (COPPA) requires organizations to verify the age of users to ensure they are not collecting personal information from children under 13 without parental consent, which is a key protection mechanism.
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