Question 1

A firm is most likely to favor foreign direct investment over exporting when

Accepted Answer

A)  the firm wants its technological know-how to be widely disseminated.
B)  the firm wishes to maintain control over its operations and business strategy.
C)  the transportation costs are low.
D)  there are no trade barriers.
E)  the firm wants to customize its products as per the tastes and preferences of foreign consumers.F) D) and E)
G) All of the above

Question 2

The WTO embraces the promotion of international trade in services.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is most likely to be true regarding the adverse effects of FDI on the host country?

Accepted Answer

A)  It decreases the level of competition in the host country.
B)  It tends to increase the prices of the products.
C)  It leads to a high rate of unemployment in the long run.
D)  When a foreign subsidiary imports a substantial number of its inputs from abroad,it results in a debit on the current account of the host country's balance of payments.
E)  When a foreign subsidiary sends its profits to its home country,it results in the depletion of gold reserves of the host country.F) C) and E)
G) A) and B)

Question 4

An acquisition does not result in a net increase in the number of players in a market.

Accepted Answer

A) True 
 B)False

Question 5

The Spanish company,Almodovar Family Holdings obtained the right to produce and sell the U.S.-based Omega,Inc.'s products in Spain in return for a royalty fee to Omega,Inc.on every unit it sells in Spain.Almodovar Family Holdings is Omega,Inc.'s

Accepted Answer

A)  franchisor.
B)  franchisee.
C)  licensor.
D)  licensee.
E)  competitor.F) D) and E)
G) C) and D)

Question 6

The tendency to aggressively court FDI believed to be in the national interest of a country is an aspect of

Accepted Answer

A)  pragmatic nationalism.
B)  the radical view.
C)  nationalism.
D)  imitative theory.
E)  eclectic paradigm.F) All of the above
G) A) and B)

Question 7

Which of the following is one of the limitations of exporting that leads companies to prefer FDI over exporting?

Accepted Answer

A)  presence or threat of trade barriers
B)  costs of acquiring a foreign enterprise
C)  costs of establishing production facilities in a foreign country
D)  risk of giving away valuable technological know-how to a potential foreign competitor
E)  possibility of diminishing returnsF) A) and D)
G) A) and B)

Question 8

The top management team at the Kentucky-based Mumford Products collectively support the market imperfections approach.This means Mumford Products' top management team is most likely to

Accepted Answer

A)  adopt a completely free market view.
B)  understand why different nations import goods from other countries even when they are more capable of producing them efficiently.
C)  express a preference for FDI over licensing as a strategy to enter foreign markets.
D)  propagate the benefits of exercising protectionism coupled with partial adoption of free market approach.
E)  abandon going overseas.F) B) and C)
G) All of the above C

Question 9

Which 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)  Keynesian economicF) A) and E)
G) A) and D)

Question 10

If one firm in an oligopoly cuts prices,then most likely,its competitors will

Accepted Answer

A)  make profits.
B)  also respond with similar price cuts.
C)  correspondingly raise prices.
D)  capture additional market share.
E)  not be impacted by the price cuts.F) B) and C)
G) B) and E)

Question 11

The cement market in Erbia is dominated by four firms.These firms control 85 percent of selling and buying of the domestic market.Which of the following terms explains the market structure of the cement industry in Erbia?

Accepted Answer

A)  perfect competition
B)  onopoly
C)  oligopoly
D)  dual monopoly
E)  monopsonyF) B) and D)
G) B) and E)

Question 12

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  True

Question 13

Ohio Manufacturing prefers FDI over licensing to retain control over know-how,manufacturing,and marketing.Ohio Manufacturing's stance constitutes the

Accepted Answer

A)  comparative advantage theory.
B)  distribution theory.
C)  new trade approach.
D)  market imperfections approach.
E)  licensing theory.F) All of the above
G) A) and D)

Question 14

Describe Dunning's arguments regarding the location-specific advantages.

Accepted Answer

The eclectic paradigm has been champione...

Question 15

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) B) and E)
G) C) and E)

Question 16

The indirect employment effects of FDI are often as large as,if not larger than,the direct effects.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Services such as telecommunications,retailing,and many financial services,where the service has to be produced where it is delivered,lend themselves well to exporting.

Accepted Answer

A) True 
 B)False

Question 19

Which view of FDI traces its roots to Marxist political and economic theory?

Accepted Answer

A)  radical
B)  free market
C)  pragmatic nationalism
D)  comparative advantage
E)  pluralistF) B) and E)
G) C) and D)

Question 20

Which of the following indicates that a firm has a full outright stake in an acquisition?

Accepted Answer

A)  Anderson Corporation acquires at least 75 percent of a company.
B)  Sheffield Enterprises acquires at least 60 percent of a company.
C)  Arthur Enterprises acquires 98 percent of a company.
D)  Maximus Corporation acquires 100 percent of a company.
E)  Dream Animax acquires at least 85 percent of a company.F) A) and B)
G) A) and E) D

Exam 8: Foreign Direct Investment

A firm is most likely to favor foreign direct investment over exporting when

Correct AnswerverifiedShow Answer

The WTO embraces the promotion of international trade in services.

Correct AnswerverifiedShow Answer

Which of the following statements is most likely to be true regarding the adverse effects of FDI on the host country?

Correct AnswerverifiedShow Answer

An acquisition does not result in a net increase in the number of players in a market.

Correct AnswerverifiedShow Answer

The Spanish company,Almodovar Family Holdings obtained the right to produce and sell the U.S.-based Omega,Inc.'s products in Spain in return for a royalty fee to Omega,Inc.on every unit it sells in Spain.Almodovar Family Holdings is Omega,Inc.'s

Correct AnswerverifiedShow Answer

The tendency to aggressively court FDI believed to be in the national interest of a country is an aspect of

Correct AnswerverifiedShow Answer

Which of the following is one of the limitations of exporting that leads companies to prefer FDI over exporting?

Correct AnswerverifiedShow Answer

The top management team at the Kentucky-based Mumford Products collectively support the market imperfections approach.This means Mumford Products' top management team is most likely to

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

If one firm in an oligopoly cuts prices,then most likely,its competitors will

Correct AnswerverifiedShow Answer

The cement market in Erbia is dominated by four firms.These firms control 85 percent of selling and buying of the domestic market.Which of the following terms explains the market structure of the cement industry in Erbia?

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 AnswerverifiedTrue

Ohio Manufacturing prefers FDI over licensing to retain control over know-how,manufacturing,and marketing.Ohio Manufacturing's stance constitutes the

Correct AnswerverifiedShow Answer

Describe Dunning's arguments regarding the location-specific advantages.

Correct AnswerverifiedThe eclectic paradigm has been champione...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The indirect employment effects of FDI are often as large as,if not larger than,the direct effects.

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

Services such as telecommunications,retailing,and many financial services,where the service has to be produced where it is delivered,lend themselves well to exporting.

Correct AnswerverifiedShow Answer

Which view of FDI traces its roots to Marxist political and economic theory?

Correct AnswerverifiedShow Answer

Which of the following indicates that a firm has a full outright stake in an acquisition?

Correct AnswerverifiedD

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The eclectic paradigm has been champione...
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