Question 1

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they

Accepted Answer

A)   were the most developed countries postwar and home to the largest and best capitalized enterprises.
B)   pursued a policy of blocking or restricting FDI inflow into their own economies.
C)   provided subsidies for their domestic firms to protect them from foreign competition.
D)   control much of the operating structure of the WTO which governs international trade.
E)   were the governing body of the International Monetary Fund.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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.

Question 4

Most developing countries do not have access to the technology available in developed nations, but these developing nations need technology to create new jobs and stimulate the economy. Which aspect of inward FDI do these developing nations rely on to have access to needed technology?

Accepted Answer

A)   balance-of-payments effects
B)   employment effects
C)   effects on foreign exchange rate
D)   effects on competition
E)   resource-transfer effects

Question 5

Some countries have oil as a natural resource and BronzePlate Inc., based in Illinois, is considering building a facility in one of those foreign countries since it does not have easy access to oil near its manufacturing plant. Which theory of foreign direct investment provides an explanation for this decision?

Accepted Answer

A)   eclectic paradigm
B)   protectionism argument
C)   product life-cycle theory
D)   new trade theory
E)   infant industry argument

Question 6

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.

Question 7

The attractiveness of exporting is reduced when a product can easily be produced in almost any location.

Accepted Answer

A) True 
 B)False

Question 8

Which political view argues that international production should be distributed among countries according to the theory of comparative advantage?

Accepted Answer

A)   conservative
B)   pragmatic nationalism
C)   free market
D)   radical
E)   planned

Question 9

The most important concerns regarding the costs of FDI for the home country center on the

Accepted Answer

A)   balance-of-payments and employment effects of outward FDI.
B)   technology capture effect and the perceived loss of national sovereignty.
C)   reverse-resource transfer effect and the exposure to foreign markets caused by FDI.
D)   import of substantial input from abroad and being held to "economic ransom."
E)   exposure to foreign markets and the decreased costs of production.

Question 10

The pragmatic nationalist view regarding FDI is that

Accepted Answer

A)   FDI benefits only the host country.
B)   FDI does not make any positive contribution to the host economy.
C)   every country should adopt the free market view.
D)   FDI should not be allowed by any country as it is an instrument of economic domination rather than economic development.
E)   FDI has both benefits and costs.

Question 11

Offshore production refers to FDI undertaken to serve the host market.

Accepted Answer

A) True 
 B)False

Question 12

When a country in Central America 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)   outward FDI.
E)   net capital inflow.

Question 13

Briefly describe the benefits of inward FDI for a host country that arise from employment effects and balance-of-payments effects.

Accepted Answer

The main benefits of inward FDI for a ho...

Question 14

Direct effects of FDI on employment in the host country arise when a foreign MNE

Accepted Answer

A)   brings in managers trained in the latest management techniques from the home country.
B)   creates jobs because of increased local spending by employees of the MNE.
C)   employs a number of host country citizens.
D)   causes local suppliers to hire more people.
E)   creates jobs in the supporting industries.

Question 15

The aluminum and steel industry in a foreign country is dominated by just three firms and these firms control at least 80 percent of the domestic market. The market structure in this country is a(n)

Accepted Answer

A)   perfect competition.
B)   democracy.
C)   oligopoly.
D)   monopoly.
E)   monarchy.

Question 16

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.

Question 17

The eclectic paradigm is based on the idea that intellectual property is of considerable importance in explaining the direction of FDI.

Accepted Answer

A) True 
 B)False

Question 18

Dunning's theory helps explain

Accepted Answer

A)   how firms try to match each other's moves in different markets to try to hold each other in check.
B)   the prevalence of imitative behavior among rivals.
C)   why a greenfield investment in a new facility is better than an acquisition.
D)   the problems associated with doing business in a different culture.
E)   how location factors affect the direction of FDI.

Question 19

Gibson Electronics identifies licensees in various countries who produce and sell the company's products in their countries in return for a royalty fee on every unit sold. Gibson Electronics' approach is risky because of the problems associated with

Accepted Answer

A)   sharing valuable technological know-how with a potential competitor.
B)   an increase in transportation costs, especially for those products that have a low value-to-weight ratio.
C)   doing business in a different culture where the rules of the game may be very different.
D)   the possibility of an increase in trade barriers such as import tariffs or quotas.
E)   increased production costs.

Question 20

The textile industry in a foreign country is controlled by four major companies. Last week, one of the companies decided to cut prices as a way to expand inventory. Since this industry is an oligopoly, what will be the likely response of the other three companies?

Accepted Answer

A)   They will increase production levels.
B)   They will make similar price cuts.
C)   They will raise prices.
D)   They will seek additional market share.
E)   They will not respond to the price cuts.

Exam 8: Foreign Direct Investment

Gibson Electronics identifies licensees in various countries who produce and sell the company's products in their countries in return for a royalty fee on every unit sold. Gibson Electronics' approach is risky because of the problems associated with

Correct Answer
verified

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

Correct Answer
verified

The most important concerns regarding the costs of FDI for the home country center on the

Correct Answer
verified

The interdependence between firms in an oligopoly leads to

Correct Answer
verified

The attractiveness of exporting is reduced when a product can easily be produced in almost any location.

Correct Answer
verified

Dunning's theory helps explain

Correct Answer
verified

The textile industry in a foreign country is controlled by four major companies. Last week, one of the companies decided to cut prices as a way to expand inventory. Since this industry is an oligopoly, what will be the likely response of the other three companies?

Correct Answer
verified

Most developing countries do not have access to the technology available in developed nations, but these developing nations need technology to create new jobs and stimulate the economy. Which aspect of inward FDI do these developing nations rely on to have access to needed technology?

Correct Answer
verified

Which political view argues that international production should be distributed among countries according to the theory of comparative advantage?

Correct Answer
verified

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they

Correct Answer
verified

The aluminum and steel industry in a foreign country is dominated by just three firms and these firms control at least 80 percent of the domestic market. The market structure in this country is a(n)

Correct Answer
verified

Briefly describe the benefits of inward FDI for a host country that arise from employment effects and balance-of-payments effects.

Correct Answer
verified
The main benefits of inward FDI for a ho...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

The eclectic paradigm is based on the idea that intellectual property is of considerable importance in explaining the direction of FDI.

Correct Answer
verified

Offshore production refers to FDI undertaken to serve the host market.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Direct effects of FDI on employment in the host country arise when a foreign MNE

Correct Answer
verified

The pragmatic nationalist view regarding FDI is that

Correct Answer
verified

Exam 8: Foreign Direct Investment

Gibson Electronics identifies licensees in various countries who produce and sell the company's products in their countries in return for a royalty fee on every unit sold. Gibson Electronics' approach is risky because of the problems associated with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The most important concerns regarding the costs of FDI for the home country center on the

Correct AnswerverifiedShow Answer

The interdependence between firms in an oligopoly leads to

Correct AnswerverifiedShow Answer

The attractiveness of exporting is reduced when a product can easily be produced in almost any location.

Correct AnswerverifiedShow Answer

Dunning's theory helps explain

Correct AnswerverifiedShow Answer

The textile industry in a foreign country is controlled by four major companies. Last week, one of the companies decided to cut prices as a way to expand inventory. Since this industry is an oligopoly, what will be the likely response of the other three companies?

Correct AnswerverifiedShow Answer

Most developing countries do not have access to the technology available in developed nations, but these developing nations need technology to create new jobs and stimulate the economy. Which aspect of inward FDI do these developing nations rely on to have access to needed technology?

Correct AnswerverifiedShow Answer

Which political view argues that international production should be distributed among countries according to the theory of comparative advantage?

Correct AnswerverifiedShow Answer

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they

Correct AnswerverifiedShow Answer

The aluminum and steel industry in a foreign country is dominated by just three firms and these firms control at least 80 percent of the domestic market. The market structure in this country is a(n)

Correct AnswerverifiedShow Answer

Briefly describe the benefits of inward FDI for a host country that arise from employment effects and balance-of-payments effects.

Correct AnswerverifiedThe main benefits of inward FDI for a ho...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The eclectic paradigm is based on the idea that intellectual property is of considerable importance in explaining the direction of FDI.

Correct AnswerverifiedShow Answer

Offshore production refers to FDI undertaken to serve the host market.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Direct effects of FDI on employment in the host country arise when a foreign MNE

Correct AnswerverifiedShow Answer

The pragmatic nationalist view regarding FDI is that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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verified
The main benefits of inward FDI for a ho...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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