Question 1

Which of the following are national accounts that track both payments to and receipts from other countries?

Accepted Answer

A)  equity
B)  dematerialized
C)  balance of trade
D)  asset
E)  balance-of-paymentsF) All of the above
G) D) and E)

Question 2

According to the radical view of FDI,multinational enterprises (MNEs) that already exist in a country should be

Accepted Answer

A)  immediately nationalized.
B)  made to pay higher taxes.
C)  converted into publicly traded companies.
D)  banned from obtaining finance from the financial institutions in the host country.
E)  immediately privatized.F) B) and D)
G) B) and E)

Question 3

Which of the following refers to the amount of FDI undertaken over a given period (normally a year) ?

Accepted Answer

A)  portfolio
B)  flow
C)  status
D)  stock
E)  fragmentF) None of the above
G) C) and E)

Question 4

At the end of 2015,companies from the country of Erithrea collectively owned $37 billion in assets in its neighboring country of Outflowia.The $37 billion is Erithrea's _______ of FDI.:

Accepted Answer

A)  stock
B)  flow
C)  outflow
D)  trend.
E)  exchange.F) C) and E)
G) A) and B)

Question 5

According to the free market view,how does FDI increase the efficiency of the world economy through MNEs?

Accepted Answer

A)  The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe.
B)  MNEs extract profits from the host country and take them to their home country and help all countries realize economies of scale.
C)  When an MNE produces products,profits from the investment go abroad,and hence the MNE helps foreign exchange to rotate.
D)  A foreign-owned manufacturing plant may import many components from its home country,thus improving the balance of payments of the host country.
E)  MNEs increase the efficiency of the world economy by increasing the flow of capital in the world market.F) C) and D)
G) All of the above

Question 6

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) A) and B)
G) C) and D)

Question 7

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 E)
G) B) and C)

Question 8

Which of the following is true about Dunning's arguments?

Accepted Answer

A)  Dunning rejects the argument of internalization theory that it is difficult for a firm to license its own unique capabilities and know-how.
B)  Dunning suggests that to exploit foreign resources,such as oil and other minerals,a firm must undertake licensing rather than FDI.
C)  Dunning argues that it makes sense for a firm to locate production facilities in those countries where the cost and skills of local labor is most suited to its particular production processes,since labor is not internationally mobile.
D)  Dunning's theory and its extensions help explain the imitative FDI behavior by firms in oligopolistic industries.
E)  Dunning argues that combining location-specific assets or resource endowments with the firm's own unique capabilities always requires licensing.F) A) and B)
G) B) and D)

Question 9

Which of the following arises when two or more enterprises encounter each other in different regional markets,national markets,or industries?

Accepted Answer

A)  monopoly
B)  monopsony
C)  cartel
D)  multipoint competition
E)  oligopsonyF) None of the above
G) A) and C)

Question 10

"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 11

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan.This is an example of

Accepted Answer

A)  insourcing.
B)  stock consolidation.
C)  foreign direct investment.
D)  product differentiation.
E)  market segmentation.F) A) and E)
G) A) and D)

Question 12

A firm's bargaining power is low when the host government places a low value on what the firm has to offer.

Accepted Answer

A) True 
 B)False

Question 13

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

Accepted Answer

A) True 
 B)False

Question 14

Host governments use a range of controls to restrict inward FDI.The two most common are

Accepted Answer

A)  monetary restraints and prohibition on investing in certain countries.
B)  voluntary export restrictions and employment restraints.
C)  ownership restraints and performance requirements.
D)  tax concessions and government-backed insurance.
E)  employment restraints and tax deductions.F) B) and D)
G) None of the above

Question 15

Which of the following is a home-country policy for limiting outward FDI?

Accepted Answer

A)  eliminating double taxation of foreign income
B)  manipulating tax rules to encourage the firms to invest at home
C)  withdrawing government-backed insurance programs provided to local investors
D)  reducing interest rates earned on domestic investments
E)  prohibiting organizations from entering into a cartelF) C) and D)
G) D) and E)

Question 16

Ownership restraints and performance requirements are the two most common ways in which host governments restrict FDI.

Accepted Answer

A) True 
 B)False

Question 17

Which account in the balance of payments records transactions involving the export and import of goods and services?

Accepted Answer

A)  current
B)  foreign
C)  internal
D)  tariff
E)  savingsF) A) and D)
G) D) and E)

Question 18

The globalization of the world economy is having a negative effect on the volume of FDI.

Accepted Answer

A) True 
 B)False

Question 19

Franchising is essentially the service-industry version of licensing,although it normally involves much longer-term commitments than licensing.

Accepted Answer

A) True 
 B)False

Question 20

Silicon Valley in California is the world center for the computer and semiconductor industry and has many of the world's major computer and semiconductor companies located close to each other,thus offering the location-specific advantage of

Accepted Answer

A)  a multipoint competition.
B)  an oligopoly.
C)  a first mover.
D)  externalities.
E)  free riders.F) C) and E)
G) A) and E)

Exam 8: Foreign Direct Investment

Host governments use a range of controls to restrict inward FDI.The two most common are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

At the end of 2015,companies from the country of Erithrea collectively owned $37 billion in assets in its neighboring country of Outflowia.The $37 billion is Erithrea's _______ of FDI.:

Correct AnswerverifiedShow Answer

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan.This is an example of

Correct AnswerverifiedShow Answer

Which of the following is true about Dunning's arguments?

Correct AnswerverifiedShow Answer

Which of the following refers to the amount of FDI undertaken over a given period (normally a year) ?

Correct AnswerverifiedShow Answer

According to the free market view,how does FDI increase the efficiency of the world economy through MNEs?

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

Silicon Valley in California is the world center for the computer and semiconductor industry and has many of the world's major computer and semiconductor companies located close to each other,thus offering the location-specific advantage of

Correct AnswerverifiedShow Answer

According to the radical view of FDI,multinational enterprises (MNEs) that already exist in a country should be

Correct AnswerverifiedShow Answer

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

Correct AnswerverifiedShow Answer

Franchising is essentially the service-industry version of licensing,although it normally involves much longer-term commitments than licensing.

Correct AnswerverifiedShow Answer

Which of the following are national accounts that track both payments to and receipts from other countries?

Correct AnswerverifiedShow Answer

Which of the following arises when two or more enterprises encounter each other in different regional markets,national markets,or industries?

Correct AnswerverifiedShow Answer

Which account in the balance of payments records transactions involving the export and import of goods and services?

Correct AnswerverifiedShow Answer

A firm's bargaining power is low when the host government places a low value on what the firm has to offer.

Correct AnswerverifiedShow Answer

Ownership restraints and performance requirements are the two most common ways in which host governments restrict FDI.

Correct AnswerverifiedShow Answer

Which of the following is a home-country policy for limiting outward FDI?

Correct AnswerverifiedShow Answer

The globalization of the world economy is having a negative effect on the volume of FDI.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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There are several factors that dictate t...
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