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Exam 8: Foreign Direct Investment

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Question 21

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

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 exchange

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

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Question 22

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

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A firm will favor foreign direct investm...

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Question 23

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

How can governments restrict the outward flow of FDI?

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

A firm's bargaining power is low when the host government places a low value on what the firm has to offer.

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

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

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.

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

In the context of the internalization theory, explain why licensing may not be an attractive option.

When a firm exports its products to a foreign country, foreign direct investment occurs.

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

Greenfield investment involves the establishment of a new operation in a foreign country.

The viability of an exporting strategy is often constrained by transportation costs, particularly of products that can be produced in almost any location and have a:

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, thus offering the location-specific advantage of:

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

Which of the following states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI, and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located? A.Strategic trade policy B.Integration approach C.Scramble theory D.Eclectic paradigm E.Infant industry argument

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

Briefly describe the benefits of inward FDI for a host country that arise from employment effects and balance-of-payments effects.