Quiz 6
A critical competitive feature of an oligopoly is independence of the major players.
false -An oligopoly is an industry composed of a limited number of large firms. A critical competitive feature of such industries is interdependence of the major players: What one firm does can have an immediate impact on the major competitors, forcing a response in kind.
When a firm exports its products to a foreign country, foreign direct investment occurs.
false -Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce or market a product in a foreign country. According to the U.S. Department of Commerce, FDI occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity.
The globalization of the world economy is having a negative effect on the volume of FDI.
false -The globalization of the world economy is having a positive effect on the volume of FDI. Many firms now see the whole world as their market, and they are undertaking FDI in an attempt to make sure they have a significant presence in many regions of the world.
The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.
false -The viability of an exporting strategy is often constrained by transportation costs and trade barriers. When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. This is particularly true of products that have a low value-to-weight ratio and that can be produced in almost any location. For such products, the attractiveness of exporting decreases, relative to either FDI or licensing.
Which of the following refers to the amount of FDI undertaken over a given period (normally a year)?
flow
According to the U.S. Department of Commerce, which of the following, occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity?
foreign direct investment
Which of the following is most likely to involve establishment of a new operation in a foreign country?
greenfield investment
The argument that firms prefer FDI over licensing to retain control over know-how, manufacturing, marketing, and strategy or because some firm capabilities are not amenable to licensing constitutes the
internalization theory
Once it undertakes FDI, a firm becomes a(n)
multinational enterprise.
Which of the following is one of the limitations of exporting that leads companies to prefer FDI over exporting?
presence or threat of trade barriers
The United States has been an attractive target for FDI partly because of its
stable and dynamic economy
The market imperfections approach seeks to explain
the preference for FDI over licensing by firms as a strategy to enter foreign markets
A firm will favor FDI over exporting as an entry strategy when
the transportation costs or trade barriers are high.
According to the free market view, countries should specialize in the production of those goods and services that they can produce most efficiently.
true
An acquisition does not result in a net increase in the number of players in a market.
true
By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.
true
Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.
true
The indirect employment effects of FDI are often as large as, if not larger than, the direct effects.
true
When a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks.
true
Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they
were the most developed countries postwar and home to the largest and best capitalized enterprises.
