Question 1

How does increased competition through FDI in the form of greenfield investments impact the host country?

Accepted Answer

A)  It drives down prices and increases the economic welfare of consumers.
B)  It raises retrenchments and unemployment levels.
C)  It causes firms to fight for scarce capital investments.
D)  It leads to a monopolistic market and unfair pricing.E) All of the above
F) A) and B)

Question 2

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)  stockE) C) and D)
F) B) and D)

Question 3

FDI has grown significantly slower than world trade and world output.

Accepted Answer

A) True 
 B)False

Question 4

Some host countries fear a loss of economic independence through FDI as key decisions that can affect their economies will be made by foreign parents that have no:

Accepted Answer

A)  profitable returns on their investments.
B)  economic interest in their host countries.
C)  real commitment to their host countries.
D)  investment in the education and health of the population.E) B) and C)
F) All of the above

Question 5

According to the text,the most important concerns regarding the costs of FDI for the home-country center on:

Accepted Answer

A)  the balance-of-payments and employment effects of outward FDI.
B)  the technology capture effect and the perceived loss of national sovereignty.
C)  the reverse-resource transfer effect and the exposure to foreign markets caused by FDI.
D)  the import of substantial input from abroad and being held to "economic ransom."E) A) and B)
F) C) and D)

Question 6

Which of the following is NOT a common incentive that governments offer foreign firms to invest in their countries?

Accepted Answer

A)  Grants or subsidies
B)  Ownership restraints
C)  Low-interest loans
D)  Tax concessionsE) All of the above
F) A) and B)

Question 7

Which of the following theories concerning FDI ignores alternatives such as exporting and licensing and fails to identify when it is profitable to invest abroad?

Accepted Answer

A)  Investment theory
B)  Multipoint competition theory
C)  Eclectic paradigm
D)  Product life-cycle theoryE) All of the above
F) C) and D)

Question 8

Developing nations such as Poland and Ukraine were the largest national recipients of inward investments within the EU in 2007.

Accepted Answer

A) True 
 B)False

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)  exportingE) A) and B)
F) A) and C)

Question 10

Which of the following involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold?

Accepted Answer

A)  Outsourcing
B)  Exporting
C)  Licensing
D)  Product divestmentE) B) and C)
F) All of the above

Question 11

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)  a firm's competitive advantage is based entirely on its products with management,marketing,and manufacturing capabilities playing nominal roles.E) All of the above
F) A) and B)

Question 12

Data suggest the majority of cross-border investment is in the form of _____ for developed nations.

Accepted Answer

A)  greenfield investments
B)  exports
C)  franchising
D)  mergers and acquisitionsE) A) and D)
F) B) and C)

Question 13

A firm has full outright stake in an acquisition when it acquires:

Accepted Answer

A)  at least 38 percent of a company.
B)  at least 60 percent of a company.
C)  at least 98 percent of a company.
D)  100 percent of a company.E) B) and C)
F) All of the above

Question 14

Executives of foreign firms see FDI as a way of circumventing future trade barriers.

Accepted Answer

A) True 
 B)False

Question 15

According to the _____ view,FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs.

Accepted Answer

A)  eclectic
B)  free market
C)  pragmatic nationalism
D)  radicalE) None of the above
F) B) and D)

Question 16

With regard to employment effects in home countries,the most serious concerns arise when FDI is seen as a substitute for _____.

Accepted Answer

A)  capital investments
B)  licensing
C)  domestic production
D)  greenfield investmentsE) A) and B)
F) A) and C)

Question 17

In 1995,the OECD initiated talks to draft a multilateral agreement on investment that legalized discrimination against foreign investors by signatory states.

Accepted Answer

A) True 
 B)False

Question 18

In the 1960s,RCA licensed its leading-edge color television technology to a number of Japanese companies,which later took over the market.This demonstrates that licensing:

Accepted Answer

A)  is a better alternative to help companies from emerging economies to enhance their competitiveness and achieve growth.
B)  subscribes to the open source ideology which aids the development of technology unencumbered by market dynamics and fluctuations.
C)  may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
D)  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.E) A) and B)
F) C) and D)

Question 19

The establishment of a wholly new operation in a foreign country is referred to as a(n) :

Accepted Answer

A)  consolidation.
B)  greenfield investment.
C)  acquisition.
D)  licensing agreement.E) C) and D)
F) None of the above

Question 20

Under the pragmatic nationalism view,no country should ever permit foreign corporations to undertake FDI.

Accepted Answer

A) True 
 B)False

Exam 7: Foreign Direct Investment

With regard to employment effects in home countries,the most serious concerns arise when FDI is seen as a substitute for _____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Executives of foreign firms see FDI as a way of circumventing future trade barriers.

Correct AnswerverifiedShow Answer

Which of the following involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the _____ view,FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs.

Correct AnswerverifiedShow Answer

Which of the following is NOT a common incentive that governments offer foreign firms to invest in their countries?

Correct AnswerverifiedShow Answer

Some host countries fear a loss of economic independence through FDI as key decisions that can affect their economies will be made by foreign parents that have no:

Correct AnswerverifiedShow Answer

Under the pragmatic nationalism view,no country should ever permit foreign corporations to undertake FDI.

Correct AnswerverifiedShow Answer

How does increased competition through FDI in the form of greenfield investments impact the host country?

Correct AnswerverifiedShow Answer

The establishment of a wholly new operation in a foreign country is referred to as a(n) :

Correct AnswerverifiedShow Answer

In the 1960s,RCA licensed its leading-edge color television technology to a number of Japanese companies,which later took over the market.This demonstrates that licensing:

Correct AnswerverifiedShow Answer

Developing nations such as Poland and Ukraine were the largest national recipients of inward investments within the EU in 2007.

Correct AnswerverifiedShow Answer

Which of the following theories concerning FDI ignores alternatives such as exporting and licensing and fails to identify when it is profitable to invest abroad?

Correct AnswerverifiedShow Answer

In 1995,the OECD initiated talks to draft a multilateral agreement on investment that legalized discrimination against foreign investors by signatory states.

Correct AnswerverifiedShow Answer

FDI has grown significantly slower than world trade and world output.

Correct AnswerverifiedShow Answer

A firm has full outright stake in an acquisition when it acquires:

Correct AnswerverifiedShow Answer

Data suggest the majority of cross-border investment is in the form of _____ for developed nations.

Correct AnswerverifiedShow Answer

According to the text,the most important concerns regarding the costs of FDI for the home-country center on:

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

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