Question 1

CopperCore Inc., a U.S. business, took a 31 percent equity interest in Javier Holdings, a family business based in Spain. According to the U.S. Department of Commerce, this would be an example of

Accepted Answer

A)   multilateral investment.
B)   foreign direct investment.
C)   reciprocal foreign investment.
D)   international divestment.
E)   asset divestment.F) A) and B)
G) A) and C)

Question 2

A possible effect of FDI in the form of a greenfield investment in a host country is that it

Accepted Answer

A)   drives down prices and increases the economic welfare of consumers.
B)   raises unemployment levels.
C)   causes firms to fight for scarce capital investments.
D)   leads to an oligopolistic market and unfair pricing.
E)   leads to decreased productivity, product and process innovations, and lesser economic growth.F) A) and B)
G) A) and E)

Question 3

There are at least 30 firms that control 70 percent of the computer printer business in Europe. This is an example of an oligopoly.

Accepted Answer

A) True 
 B)False

Question 4

When two or more enterprises encounter each other in different regional markets, national markets, or industries, it creates

Accepted Answer

A)   a monopoly.
B)   a planned economy.
C)   immediate trade wars.
D)   multipoint competition.
E)   the market imperfections approach.F) B) and E)
G) A) and C)

Question 5

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 6

The United Nations was the first multinational institution to govern FDI beginning in the 1930s.

Accepted Answer

A) True 
 B)False

Question 7

A current account surplus is favored over a deficit. If a country is faced with a current account deficit it would have to ________ in order to support this situation.

Accepted Answer

A)   borrow from the IMF
B)   sell assets to foreigners
C)   divest stock in domestic corporations
D)   purchase stocks, bonds, and real estate in other countries
E)   issue negotiable instruments like bills of exchangeF) B) and C)
G) D) and E)

Question 8

WoodCore Inc. produces an entire line of office furniture at its manufacturing facility in the United States and then ships its products for sale to various companies in Europe. WoodCore Inc. is involved in

Accepted Answer

A)   outsourcing.
B)   licensing.
C)   franchising.
D)   exporting.
E)   diversifying.F) All of the above
G) B) and D)

Question 9

General Electric (GE)  built an operation from scratch in Nigeria. This is an example of a(n)

Accepted Answer

A)   merger.
B)   acquisition.
C)   strategic alliance.
D)   FDI stock.
E)   greenfield investment.F) A) and D)
G) A) and C)

Question 10

The location-specific advantages argument associated with John Dunning helps explain why firms prefer FDI to licensing or to exporting.

Accepted Answer

A) True 
 B)False

Question 11

Michelin and Goodyear compete against each other not only in the United States, but also all across Europe and Asia. These two tire companies are

Accepted Answer

A)   a monopoly.
B)   engaged in cooperation.
C)   a cartel.
D)   engaged in multipoint competition.
E)   an oligopsony.F) B) and C)
G) None of the above

Question 12

Firms for which licensing is NOT a good option include those

Accepted Answer

A)   based in low-technology industries.
B)   that have valuable know-how.
C)   characterized by low cost pressures.
D)   where transportation costs are high.
E)   which need to have low control over foreign operations.F) A) and C)
G) B) and E)

Question 13

As an incentive to encourage domestic firms to undertake FDI, many advanced countries have

Accepted Answer

A)   eliminated double taxation of foreign income.
B)   started imposing local content requirements.
C)   imposed higher import tariffs.
D)   abolished the use of custom duties.
E)   eliminated subsidies.F) C) and D)
G) A) and B)

Question 14

The top management team at 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) All of the above
G) A) and E)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

What form of FDI is NOT an option in the service industry, 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) B) and C)
G) A) and B)

Question 17

Kendrik needs to track which goods have been exported by the United States and which goods have been imported. To learn this, he should use the ________ account.

Accepted Answer

A)   current
B)   payments
C)   internal
D)   tariff
E)   savingsF) A) and E)
G) All of the above

Question 18

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 there. This provides the location-specific advantage of

Accepted Answer

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

Question 19

Renata asked her assistant to determine the amount of foreign direct investment the company had taken over the past year. Renata is interested in the

Accepted Answer

A)   state of GNI.
B)   flow of FDI.
C)   flow of GDP.
D)   stock of FDI.
E)   status of JIT.F) None of the above
G) A) and C)

Question 20

Rather than acquire an existing textile manufacturer in Jakarta, FauxFabric Inc. chose to establish new operations in Indonesia. This form of FDI is called

Accepted Answer

A)   consolidation.
B)   a greenfield investment.
C)   an acquisition.
D)   a licensing agreement.
E)   mass customization.F) A) and B)
G) A) and E)

Exam 8: Foreign Direct Investment

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

Correct AnswerverifiedShow Answer

Firms for which licensing is NOT a good option include those

Correct AnswerverifiedShow Answer

When two or more enterprises encounter each other in different regional markets, national markets, or industries, it creates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

WoodCore Inc. produces an entire line of office furniture at its manufacturing facility in the United States and then ships its products for sale to various companies in Europe. WoodCore Inc. is involved in

Correct AnswerverifiedShow Answer

General Electric (GE) built an operation from scratch in Nigeria. This is an example of a(n)

Correct AnswerverifiedShow Answer

CopperCore Inc., a U.S. business, took a 31 percent equity interest in Javier Holdings, a family business based in Spain. According to the U.S. Department of Commerce, this would be an example of

Correct AnswerverifiedShow Answer

A possible effect of FDI in the form of a greenfield investment in a host country is that it

Correct AnswerverifiedShow Answer

Michelin and Goodyear compete against each other not only in the United States, but also all across Europe and Asia. These two tire companies are

Correct AnswerverifiedShow Answer

Rather than acquire an existing textile manufacturer in Jakarta, FauxFabric Inc. chose to establish new operations in Indonesia. This form of FDI is called

Correct AnswerverifiedShow Answer

Kendrik needs to track which goods have been exported by the United States and which goods have been imported. To learn this, he should use the ________ account.

Correct AnswerverifiedShow Answer

The United Nations was the first multinational institution to govern FDI beginning in the 1930s.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Renata asked her assistant to determine the amount of foreign direct investment the company had taken over the past year. Renata is interested in the

Correct AnswerverifiedShow Answer

The location-specific advantages argument associated with John Dunning helps explain why firms prefer FDI to licensing or to exporting.

Correct AnswerverifiedShow Answer

What form of FDI is NOT an option in the service industry, due to the fact that many services have to be produced where they are sold?

Correct AnswerverifiedShow 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 there. This provides the location-specific advantage of

Correct AnswerverifiedShow Answer

There are at least 30 firms that control 70 percent of the computer printer business in Europe. This is an example of an oligopoly.

Correct AnswerverifiedShow Answer

As an incentive to encourage domestic firms to undertake FDI, many advanced countries have

Correct AnswerverifiedShow Answer

A current account surplus is favored over a deficit. If a country is faced with a current account deficit it would have to ________ in order to support this situation.

Correct AnswerverifiedShow 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
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified