Question 1

Under what circumstances will a firm favor foreign direct investment over exporting as an entry strategy?

Accepted Answer

A firm will favor foreign direct investm...

Question 2

Which of the following is the only way to support a current account deficit in the long run?

Accepted Answer

A)  borrowing from the IMF
B)  selling assets to foreigners
C)  divesting stock in domestic corporations
D)  purchasing stocks,bonds,and real estate in other countries
E)  issuing negotiable instruments like the bills of exchangeF) A) and D)
G) A) and B)

Question 3

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

Accepted Answer

A)  FDI does not result in job creation.
B)  FDI has only indirect effects on employment in the host country.
C)  The indirect employment effects of FDI are always smaller than the direct effects.
D)  When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment,the immediate effect is always an increase in the employment.
E)  A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.F) A) and C)
G) A) and E)

Question 4

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

Question 5

A critical competitive feature of an oligopoly is the

Accepted Answer

A)  lack of interaction among the major players.
B)  presence of a domestic market which is open for foreign firms.
C)  desire of all the major players to avoid the phenomenon of diminishing returns.
D)  interdependence of the major players.
E)  lack of imitative behavior among the major players.F) A) and C)
G) B) and C)

Question 6

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.F) B) and C)
G) D) and E)

Question 7

Arnold & Sons,a leading manufacturer of cement in the U.S is considering exporting as its FDI strategy.Exporting may not be a good option for Arnold & Sons because of cement's

Accepted Answer

A)  unattractiveness in foreign markets.
B)  high value-to-weight ratio.
C)  high cost of manufacture.
D)  low weight-to-value ratio.
E)  low value-to-weight ratio.F) C) and E)
G) All of the above

Question 8

Firms for which licensing is not a good option include those in

Accepted Answer

A)  low-technology industries.
B)  global oligopolies.
C)  industries characterized by low cost pressures.
D)  industries where transportation costs are high.
E)  industries which need to have low control over foreign operations.F) C) and D)
G) A) and D)

Question 9

Which of the following 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) A) and D)
G) C) and D)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

What is franchising? With the help of a suitable example,explain how franchising can be a profitable alternative to FDI.

Accepted Answer

Franchising is essentially the service-i...

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

Rather than acquiring Almodovar Holdings in Spain,Omega,Inc.chose to establish new operations in that country.This form of FDI is called

Accepted Answer

A)  consolidation
B)  greenfield investment
C)  acquisition
D)  licensing agreement
E)  mass customizationF) C) and D)
G) None of the above

Question 14

To encourage inward FDI,it is increasingly common for governments to

Accepted Answer

A)  offer tax concessions to foreign firms that invest in their countries.
B)  exclude foreign companies from specific industries.
C)  require that local investors own a significant proportion of the equity in a joint venture.
D)  impose high custom duties on foreign firms.
E)  prohibit MNEs from joining a cartel.F) C) and D)
G) None of the above

Question 15

Radical writers argue that

Accepted Answer

A)  a multinational enterprise (MN
E)  is an instrument of economic development rather than economic domination.
B)  MNEs are more beneficial to host countries than to their home countries.
C)  important jobs in the foreign subsidiaries of MNEs go to host-country nationals rather than to citizens of the home country.
D)  FDI by the MNEs of advanced capitalist nations keeps the less developed countries of the world relatively backward.
E)  MNEs exploit their home countries for the exclusive benefit of their host countries.F) B) and C)
G) A) and E)

Question 16

As an incentive to encourage domestic firms to undertake FDI,many 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) B) and D)

Question 17

Although it normally involves much longer-term commitments,franchising is essentially the service industry version of

Accepted Answer

A)  exporting.
B)  licensing.
C)  foreign direct investment.
D)  greenfield investment.
E)  diversifying.F) A) and B)
G) C) and E)

Question 18

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 B)
G) A) and C)

Question 19

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 E)
G) B) and E)

Question 20

According to the free market view,countries should specialize in the production of those goods and services that they can produce most efficiently.

Accepted Answer

A) True 
 B)False

Exam 8: Foreign Direct Investment

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To encourage inward FDI,it is increasingly common for governments to

Correct AnswerverifiedShow Answer

Rather than acquiring Almodovar Holdings in Spain,Omega,Inc.chose to establish new operations in that country.This form of FDI is called

Correct AnswerverifiedShow Answer

What is franchising? With the help of a suitable example,explain how franchising can be a profitable alternative to FDI.

Correct AnswerverifiedFranchising is essentially the service-i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Arnold & Sons,a leading manufacturer of cement in the U.S is considering exporting as its FDI strategy.Exporting may not be a good option for Arnold & Sons because of cement's

Correct AnswerverifiedShow Answer

Although it normally involves much longer-term commitments,franchising is essentially the service industry version of

Correct AnswerverifiedShow Answer

Dunning's theory helps explain

Correct AnswerverifiedShow Answer

According to the free market view,countries should specialize in the production of those goods and services that they can produce most efficiently.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A critical competitive feature of an oligopoly is the

Correct AnswerverifiedShow Answer

Firms for which licensing is not a good option include those in

Correct AnswerverifiedShow Answer

Which of the following is the only way to support a current account deficit in the long run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under what circumstances will a firm favor foreign direct investment over exporting as an entry strategy?

Correct AnswerverifiedA firm will favor foreign direct investm...View AnswerShow Answer

Radical writers argue that

Correct AnswerverifiedShow Answer

Which of the following 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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Franchising is essentially the service-i...
View 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
A firm will favor foreign direct investm...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified