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

Question 2

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

Question 3

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 4

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) C) and D)
G) A) and E)

Question 5

According to internalization theory:

Accepted Answer

A)  licensing gives a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.
B)  licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
C)  licensing has no major drawbacks as a strategy for exploiting foreign market opportunities.
D)  a problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management, marketing, and manufacturing capabilities that produce those products.
E)  licensing is more profitable than FDI.F) B) and D)
G) B) and E)

Question 6

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

Accepted Answer

A)  Anderson Corporations 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 Corporations acquires 100 percent of a company.
E)  Dream Animax acquires at least 85 percent of a company.F) None of the above
G) A) and B)

Question 7

A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:

Accepted Answer

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

Question 8

Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category of:

Accepted Answer

A)  employment effects.
B)  balance-of-payments effects.
C)  effects on competition.
D)  resource transfer effects.
E)  autonomy effects.F) A) and D)
G) C) and D)

Question 9

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 interdependence between firms in an oligopoly that leads to imitative behavior among the rivals.
C)  why a greenfield investment in a new facility is better than an acquisition of or a merger with an existing local firm.
D)  the problems associated with doing business in a different culture where the rules of the game may be very different.
E)  how location factors affect the direction of FDI.F) A) and C)
G) All of the above

Question 10

Once it undertakes FDI, a firm becomes a(n) :

Accepted Answer

A)  outsourcer.
B)  retail chain.
C)  offshore company.
D)  multinational enterprise.
E)  national corporation.F) A) and C)
G) A) and B)

Question 11

Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to codify in a "book of blueprints."

Accepted Answer

A) True 
 B)False

Question 12

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 13

The idea behind multipoint competition is to ensure that:

Accepted Answer

A)  a rival does not dominate one market and use the profits from there to drive competitive attacks elsewhere.
B)  the competitors cooperate with each other to establish a cartel.
C)  no other competitors can enter the market unless they resort to licensing or franchising with the initial pioneers.
D)  growing technologies or business methods in new markets are transferred to established markets.
E)  the firms in an industry prefer FDI over licensing or exporting.F) A) and D)
G) B) and E)

Question 14

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

Question 15

Which of the following involves producing goods at home and then shipping them to the receiving country for sale?

Accepted Answer

A)  Outsourcing
B)  Licensing
C)  Franchising
D)  Exporting
E)  DiversifyingF) C) and D)
G) B) and E)

Question 16

According to the U.S. Department of Commerce, which of the following, occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity?

Accepted Answer

A)  Multilateral investment
B)  Foreign direct investment
C)  Reciprocal foreign investment
D)  International divestment
E)  Asset divestmentF) A) and B)
G) B) and C)

Question 17

The WTO embraces the promotion of international trade in services.

Accepted Answer

A) True 
 B)False

Question 18

FDI is risky because of the problems associated with:

Accepted Answer

A)  sharing a 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.F) A) and C)
G) A) and D)

Question 19

The stock of foreign direct investment refers to:

Accepted Answer

A)  the total accumulated value of foreign-owned assets at a given time.
B)  the number of shares of a foreign firm held by the local investors.
C)  the amount of FDI undertaken over a given time period (normally a year) .
D)  the dividend amount paid by the foreign firm to local investors.
E)  the flow of foreign direct investment out of a country.F) C) and E)
G) A) and C)

Question 20

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) C) and D)

Exam 8: Foreign Direct Investment

The WTO embraces the promotion of international trade in services.

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

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The idea behind multipoint competition is to ensure that:

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

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Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category of:

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A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:

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

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

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

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

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The stock of foreign direct investment refers to:

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

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Dunning's theory helps explain:

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Once it undertakes FDI, a firm becomes a(n) :

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

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According to internalization theory:

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FDI is risky because of the problems associated with:

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Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to codify in a "book of blueprints."

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Which of the following involves producing goods at home and then shipping them to the receiving country for sale?

Correct AnswerverifiedShow Answer

According to the U.S. Department of Commerce, which of the following, occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity?

Correct AnswerverifiedShow Answer

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