Question 1

According to the United Nations, the majority of changes made worldwide between 1992 and 2009 in the laws governing foreign direct investment have created a more favorable environment for FDI.

Accepted Answer

A) True 
 B)False

Question 2

The United States has been an attractive target for FDI partly because of its:

Accepted Answer

A)  abundance of cheap and skilled labor.
B)  stable and dynamic economy.
C)  commitment to environmental issues.
D)  low corporate tax rates.
E)  high trade barriers.F) A) and D)
G) A) and B)

Question 3

To encourage inward FDI, it is increasingly common for governments to:

Accepted Answer

A)  offer tax concessions to foreign firms that invest in their countries.
B)  exclude foreign companies from specific industries.
C)  require that local investors own a significant proportion of the equity in a joint venture.
D)  impose high custom duties on foreign firms.
E)  prohibit MNEs from joining a cartel.F) C) and D)
G) B) and C)

Question 4

Why has FDI grown more rapidly than world trade?

Accepted Answer

A)  The decline in trade barriers has erased the fear of protectionist pressures.
B)  Executives of business firms see FDI as a way of circumventing future trade barriers.
C)  There has been a general shift toward radical and totalitarian political institutions.
D)  Privatization has made developing nations less attractive for multinational enterprises.
E)  There has been a general shift toward centrally planned command economies.F) C) and D)
G) A) and D)

Question 5

Location-specific advantages for a firm are those that arise from:

Accepted Answer

A)  acquiring the home markets of foreign firms that threaten a firm's domestic market.
B)  gaining a commanding position in one market and using them to subsidize competitive attacks in other markets.
C)  preferring exporting over licensing in order to retain control over know-how, manufacturing, marketing, and strategy.
D)  utilizing resource assets that are tied to a particular foreign location and valuable enough to be combined with the firm's own unique assets.
E)  franchising and licensing.F) C) and D)
G) C) and E)

Question 6

According to the extreme version of radical view, no country should ever permit foreign corporations to undertake FDI, because they can never be instruments of economic development, only of economic domination.

Accepted Answer

A) True 
 B)False

Question 7

The main benefits of inward FDI for a host country arise from:

Accepted Answer

A)  the resource-transfer effect, the employment effect, and the balance-of-payments effect.
B)  the labor-transfer effect, the technology effect, and the currency-exchange effect.
C)  the cultural awareness effect, first-mover advantage effect, and economic development effect.
D)  the foreign exchange reserves effect, knowledge flow effect, and the reverse resource transfer effect.
E)  the employment effect, the labor-transfer effect, and the technology effect.F) C) and D)
G) A) and C)

Question 8

Radical writers argue that:

Accepted Answer

A)  a multinational enterprise (MN
E)   is an instrument of economic development rather than economic domination.
B)  MNEs are more beneficial to host countries than to their home countries.
C)  important jobs in the foreign subsidiaries of MNEs go to host-country nationals rather than to citizens of the home country.
D)  FDI by the MNEs of advanced capitalist nations keeps the less developed countries of the world relatively backward.
E)  MNEs exploit their home countries for the exclusive benefit of their host countries.F) B) and C)
G) A) and B)

Question 9

Historically, most FDI has been directed at the least developed nations of the world.

Accepted Answer

A) True 
 B)False

Question 10

Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic stance toward FDI.

Accepted Answer

A) True 
 B)False

Question 11

"Firms prefer to acquire existing assets rather than undertake greenfield investments while contemplating FDI." Explain the reasons that support this argument.

Accepted Answer

There are several factors that dictate t...

Question 12

The market imperfections approach seeks to explain:

Accepted Answer

A)  the disadvantages associated with the adoption of a completely free market view.
B)  why different nations import goods from other countries even when they are more capable of producing them efficiently.
C)  the preference for FDI over licensing by firms as a strategy to enter foreign markets.
D)  the benefits of exercising protectionism coupled with partial adoption of free market approach.
E)  the pattern of sale of products from one country to another.F) B) and E)
G) All of the above

Question 13

According to which of the following, FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs?

Accepted Answer

A)  Eclectic paradigm theory
B)  Free market view
C)  Pragmatic nationalist view
D)  Radical view
E)  Internalization theoryF) B) and E)
G) A) and B)

Question 14

A firm will favor FDI over exporting as an entry strategy when:

Accepted Answer

A)  the costs of establishing production facilities are high.
B)  the transportation costs or trade barriers are high.
C)  there are problems associated with doing business in a different culture.
D)  the products involved have a high value-to-weight ratio.
E)  the firm wants to occupy a position that falls inside the efficiency frontier.F) B) and E)
G) None of the above

Question 15

A current account deficit is also known as a(n) :

Accepted Answer

A)  stock deficit.
B)  inventory deficit.
C)  external deficit.
D)  tariff deficit.
E)  trade deficit.F) A) and C)
G) None of the above

Question 16

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

Accepted Answer

A) True 
 B)False

Question 17

QFresh, a brand for energy drinks, launched a healthy lime-based drink without preservatives. Immediately after this another brand, Fast Fizz, which manufactures energy drinks, also announced the launch of a new refreshing drink without preservatives. Then Ignite, a third brand of energy drinks, reduced the price of its apple-based drink. Which of the following is most likely to happen in this oligopolistic market setup?

Accepted Answer

A)  QFresh and Fast Fizz will reduce the prices of their respective drinks.
B)  Fast Fizz will launch another new drink.
C)  QFresh will link up with Ignite to launch a completely new product.
D)  Fast Fizz and Ignite will collaborate against QFresh.
E)  QFresh will have an increased domestic consumption.F) All of the above
G) D) and E)

Question 18

When a country is importing more goods and services than it is exporting, it is incurring a(n) :

Accepted Answer

A)  trade surplus.
B)  current account deficit.
C)  positive balance of payment.
D)  economic recession.
E)  net capital inflow.F) All of the above
G) A) and B)

Question 19

The interdependence between firms in an oligopoly leads to:

Accepted Answer

A)  trade wars.
B)  a decrease in the supply.
C)  imitative behavior.
D)  higher demand.
E)  increased domestic consumption.F) None of the above
G) A) and D)

Question 20

Which of the following is NOT an option, due to the fact that many services have to be produced where they are sold?

Accepted Answer

A)  FDI
B)  Franchising
C)  Greenfield investment
D)  Exporting
E)  OutsourcingF) D) and E)
G) None of the above

Exam 8: Foreign Direct Investment

Which of the following is NOT an option, due to the fact that many services have to be produced where they are sold?

Correct Answer
verified

Correct Answer
verified

Location-specific advantages for a firm are those that arise from:

Correct Answer
verified

According to the United Nations, the majority of changes made worldwide between 1992 and 2009 in the laws governing foreign direct investment have created a more favorable environment for FDI.

Correct Answer
verified

The United States has been an attractive target for FDI partly because of its:

Correct Answer
verified

"Firms prefer to acquire existing assets rather than undertake greenfield investments while contemplating FDI." Explain the reasons that support this argument.

Correct Answer
verified
There are several factors that dictate t...
View Answer

To encourage inward FDI, it is increasingly common for governments to:

Correct Answer
verified

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

Correct Answer
verified

The market imperfections approach seeks to explain:

Correct Answer
verified

Historically, most FDI has been directed at the least developed nations of the world.

Correct Answer
verified

Radical writers argue that:

Correct Answer
verified

According to which of the following, FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs?

Correct Answer
verified

Why has FDI grown more rapidly than world trade?

Correct Answer
verified

The main benefits of inward FDI for a host country arise from:

Correct Answer
verified

When a country is importing more goods and services than it is exporting, it is incurring a(n) :

Correct Answer
verified

A firm will favor FDI over exporting as an entry strategy when:

Correct Answer
verified

A current account deficit is also known as a(n) :

Correct Answer
verified

According to the extreme version of radical view, no country should ever permit foreign corporations to undertake FDI, because they can never be instruments of economic development, only of economic domination.

Correct Answer
verified

The interdependence between firms in an oligopoly leads to:

Correct Answer
verified

Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic stance toward FDI.

Correct Answer
verified

Exam 8: Foreign Direct Investment

Which of the following is NOT an option, due to the fact that many services have to be produced where they are sold?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Location-specific advantages for a firm are those that arise from:

Correct AnswerverifiedShow Answer

According to the United Nations, the majority of changes made worldwide between 1992 and 2009 in the laws governing foreign direct investment have created a more favorable environment for FDI.

Correct AnswerverifiedShow Answer

The United States has been an attractive target for FDI partly because of its:

Correct AnswerverifiedShow Answer

"Firms prefer to acquire existing assets rather than undertake greenfield investments while contemplating FDI." Explain the reasons that support this argument.

Correct AnswerverifiedThere are several factors that dictate t...View AnswerShow Answer

To encourage inward FDI, it is increasingly common for governments to:

Correct AnswerverifiedShow Answer

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

Correct AnswerverifiedShow Answer

The market imperfections approach seeks to explain:

Correct AnswerverifiedShow Answer

Historically, most FDI has been directed at the least developed nations of the world.

Correct AnswerverifiedShow Answer

Radical writers argue that:

Correct AnswerverifiedShow Answer

According to which of the following, FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs?

Correct AnswerverifiedShow Answer

Why has FDI grown more rapidly than world trade?

Correct AnswerverifiedShow Answer

The main benefits of inward FDI for a host country arise from:

Correct AnswerverifiedShow Answer

When a country is importing more goods and services than it is exporting, it is incurring a(n) :

Correct AnswerverifiedShow Answer

A firm will favor FDI over exporting as an entry strategy when:

Correct AnswerverifiedShow Answer

A current account deficit is also known as a(n) :

Correct AnswerverifiedShow Answer

According to the extreme version of radical view, no country should ever permit foreign corporations to undertake FDI, because they can never be instruments of economic development, only of economic domination.

Correct AnswerverifiedShow Answer

The interdependence between firms in an oligopoly leads to:

Correct AnswerverifiedShow Answer

Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic stance toward FDI.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
There are several factors that dictate t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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