Question 1

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

Question 2

According to internalization theory,one of the drawbacks of licensing is that:

Accepted Answer

A)   it may result in a firm's technological know-how being restricted to a limited knowledge base and stifles any future development.
B)   it does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.
C)   when a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks.
D)   its use is restricted by the government by imposing tariffs and quotas.
E)   it is less cost-effective than FDI.F) A) and D)
G) None of the above

Question 3

According to the United Nations,majority of changes made worldwide between 1992 and 2008 in the laws governing foreign direct investment have created a more favorable environment for FDI.

Accepted Answer

A) True 
 B)False

Question 4

According to the pragmatic nationalist view,no country should ever permit foreign corporations to undertake FDI.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which of the following statements regarding the free market view is true?

Accepted Answer

A)   According to the free market view, MNEs decrease the overall efficiency of the world economy.
B)   No country has adopted the free market view in its pure form.
C)   According to the free market view, MNEs can never be instruments of economic development, only of economic domination.
D)   According to the free market view, FDI is beneficial to the host country of an MNE but it is harmful for the home country of the MNE.
E)   The free market view traces its roots to Marxist political and economic theory.F) C) and E)
G) A) and D)

Question 7

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 consumptionF) A) and E)
G) B) and D)

Question 8

In the balance of payments,the _____ account records transactions involving the export and import of goods and services.

Accepted Answer

A)   current
B)   foreign
C)   internal
D)   tariff
E)   savingsF) None of the above
G) C) and D)

Question 9

Many services have to be produced where they are sold; hence _____ is not an option.

Accepted Answer

A)   FDI
B)   franchising
C)   greenfield investment
D)   exporting
E)   outsourcingF) B) and E)
G) A) and E)

Question 10

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

Question 11

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 such 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 12

Economists refer to knowledge "spillovers" as externalities,and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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 effectsF) A) and B)
G) C) and E)

Question 15

The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year) .

Accepted Answer

A)   portfolio
B)   flow
C)   status
D)   stock
E)   fragmentF) A) and C)
G) All of the above

Question 16

Briefly describe the changes taking place in the attitudes toward FDI in countries across the globe.

Accepted Answer

Recent years have seen a marked decline ...

Question 17

The main benefits of inward FDI for a host country arise from:

Accepted Answer

A)   the resource-transfer effect, the employment effect, and the balance-of-payments effect.
B)   the labor-transfer effect, the technology effect, and the currency-exchange effect.
C)   the cultural awareness effect, first-mover advantage effect, and economic development effect.
D)   the foreign exchange reserves effect, knowledge flow effect, and the reverse resource transfer effect.
E)   the employment effect, the labor-transfer effect, and the technology effect.F) A) and E)
G) All of the above

Question 18

Which of the following concepts helps explain how location factors affect the direction of FDI?

Accepted Answer

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

Question 19

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 FDI for the host co...

Question 20

FDI is risky because of the problems associated with:

Accepted Answer

A)   sharing a valuable technological know-how with a potential competitor.
B)   increase in the 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 increase in trade barriers such as import tariffs or quotas.
E)   increased production costs.F) A) and B)
G) A) and E)

Exam 8: Foreign Direct Investment

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

According to internalization theory,one of the drawbacks of licensing is that:

Correct AnswerverifiedShow Answer

Briefly describe the changes taking place in the attitudes toward FDI in countries across the globe.

Correct AnswerverifiedRecent years have seen a marked decline ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Economists refer to knowledge "spillovers" as externalities,and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.

Correct AnswerverifiedShow Answer

The interdependence between firms in an oligopoly leads to _____.

Correct AnswerverifiedShow Answer

Many services have to be produced where they are sold; hence _____ is not an option.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The idea behind multipoint competition is to ensure that:

Correct AnswerverifiedShow Answer

In the balance of payments,the _____ account records transactions involving the export and import of goods and services.

Correct AnswerverifiedShow Answer

Which of the following concepts helps explain how location factors affect the direction of FDI?

Correct AnswerverifiedShow Answer

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 _____.

Correct AnswerverifiedShow Answer

The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year) .

Correct AnswerverifiedShow Answer

According to the United Nations,majority of changes made worldwide between 1992 and 2008 in the laws governing foreign direct investment have created a more favorable environment for FDI.

Correct AnswerverifiedShow Answer

According to the pragmatic nationalist view,no country should ever permit foreign corporations to undertake FDI.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the free market view is true?

Correct AnswerverifiedShow Answer

The main benefits of inward FDI for a host country arise from:

Correct AnswerverifiedShow Answer

FDI is risky because of the problems associated with:

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

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 FDI for the host co...View AnswerShow Answer

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Recent years have seen a marked decline ...
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The main benefits of FDI for the host co...
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