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| 1 | |
More and more laws and regulations are creating favorable situations for foreign direct investment throughout the world. |
| | A) | True |
| | B) | False |
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| 2 | |
The United States was been the largest source for FDI from immediately after WWII through the next half century. |
| | A) | True |
| | B) | False |
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| 3 | |
F.T. Knickerbocker created a theory of oligopolistic firm behaviors whereby the major players are interdependent on one another to enhance mutual success at competitors’ expense. |
| | A) | True |
| | B) | False |
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| 4 | |
“Externalities” is what economists refer to as the knowledge “spillovers” from locating firms near other firms in the same industry due to talent concentrations and informal networks. |
| | A) | True |
| | B) | False |
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| 5 | |
Licensing is an especially good option for three kinds of industries: high-tech industries with firm-specific expertise, global oligopolies in competitive situations, and industries with intense cost pressures. |
| | A) | True |
| | B) | False |
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| 6 | |
Which of the following is not a reason why firms would prefer a merger or acquisition instead of a greenfield investment? |
| | A) | Greenfield investments can be environmentally challenging. |
| | B) | Mergers and acquisitions are quicker to execute. |
| | C) | Foreign firms to be acquired have valuable strategic assets like brand loyalties and intellectual property. |
| | D) | Acquiring firms believe they can increase efficiency of the acquired unit. |
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| 7 | |
Theories explaining why a firm will favor direct investment instead of exporting or licensing, and theories exploring why firms in the same industry often undertake FDI at the same time, are brought together in a theory known as ___________________. |
| | A) | the integrative approach |
| | B) | the eclectic paradigm |
| | C) | factor endowment synthesis |
| | D) | externality behavior |
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| 8 | |
Between the extreme position of hostility to all inward FDI and an adherence to the noninterventionist principle of free market economics is the position known as ____________________. |
| | A) | pragmatic nationalism |
| | B) | multipoint competition |
| | C) | competitive parity |
| | D) | state-sponsored direct investment |
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| 9 | |
With the exception of a few countries that have adopted a free market policy stance, an increasing number of countries are __________________________. |
| | A) | setting up high protectionist barriers |
| | B) | discouraging foreign firms from investing, preferring instead to rely on exporting and importing |
| | C) | gravitating toward free-market ideas and liberalizing the foreign investment climate |
| | D) | dismantling nontariff barriers and relying instead on tariffs |
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| 10 | |
Research suggests that when FDI takes the form of an acquisition, employment in the host country: |
| | A) | increases almost immediately among the industries that support and sell to the acquired firm. |
| | B) | falls off rapidly and rarely recovers. |
| | C) | is unaffected compared to greenfield investments. |
| | D) | falls soon after but then tends to grow faster than domestic rivals. |
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| 11 | |
Host countries often worry that foreign firms might overpower domestic firms, and when the investment is in the form of a greenfield investment, ___________________. |
| | A) | competition increases as a new player enters the market |
| | B) | competition will decrease as domestic firms are likely to quit the market early |
| | C) | monopolistic competition will likely result |
| | D) | there is no net change in the market, only the ownership changes |
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| 12 | |
___________ of FDI to the _______ country include the impact of balance of payments from inward flows of foreign earnings, the impact of employment effects with increased demand for products and learning new skills from exposure to foreign markets. |
| | A) | Costs; home |
| | B) | Benefits; home |
| | C) | Costs; host |
| | D) | Benefits; host |
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| 13 | |
Which of the following is NOT one of the ways nations can encourage outward FDI? |
| | A) | Set up insurance program to protect firms against a variety of risks |
| | B) | Dedicate special funds or banks to make loans to firms wishing to invest in other countries |
| | C) | Use political influence to persuade other countries to open doors and relax restrictions |
| | D) | Outright purchase of other countries’ state-owned industries for privatizing with domestic firms |
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| 14 | |
Ownership restraints and performance requirements are two common controls host countries use to: |
| | A) | restrict inward FDI. |
| | B) | encourage inward FDI. |
| | C) | restrict outward FDI. |
| | D) | encourage inward FDI. |
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| 15 | |
From the perspective of a firm negotiating the terms of an investment with a host government, the firms bargaining power is _____ when the host government values what the firm has to offer, the number of alternatives for the firm is greater and the firm has a long time to complete the negotiations. |
| | A) | offset by potential diplomatic relations between the countries |
| | B) | high |
| | C) | low |
| | D) | enhanced by regulations if the host government is a member of the WTO |
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