Smartbook 2.0 Lesson 10 Ch8 FDI

When a firm invests directly in a business or venture in another country, it is called ______. WTO ISO FDI JIT

FDI

Which theory of foreign direct investment attempts to combine (1) the theories that focus on favoring direct investment when exporting and licensing are available and (2) theories that say certain locations are favored over others for FDI? The eclectic paradigm Product life-cycle The theory of comparative advantage Mercantilism

The eclectic paradigm

The ability of an individual, company, or economy to conduct an activity better than another for reasons related to location is called a(n) location-specific advantage. resource-specific advantage. asset-specific advantage. endowment-specific advantage.

location-specific advantage.

FDI that serves the home market is called ______ production.

offshore

A(n) ______ is a market form in which a market or industry has a limited number of large firms. oligopoly monopoly duopoly totopoly

oligopoly

A key cost of FDI for the home country is when the balance of payments is adversely affected by the initial capital required to finance the FDI. (Choose inflow or outflow.)

outflow

When the German-based company Forrest Health Supply Inc. developed operations in Italy, it built a manufacturing facility there. In turn, the new facility also imported supplies and equipment from companies based in Germany. Which home country benefit of FDI does this represent? Employment effects Learning effects Location effects Factor effects

Employment effects

What two positive contributions to a host country can FDI provide? Boost a country's economic growth rate correct Supply capital, technology, and management resources correct Decrease any trade imbalance Protect intellectual property

Boost a country's economic growth rate Supply capital, technology, and management resources

When the German-based company Forrest Health Supply Inc. developed operations in Italy, it built a manufacturing facility there. In turn, the new facility also imported supplies and equipment from companies based in Germany. Which home country benefit of FDI does this represent? Location effects Learning effects Factor effects Employment effects

Employment effects

What are two alternatives companies can use instead of FDI to take advantage of opportunities in foreign markets? Embargoes Exporting correct Importing incorrect Licensing

Exporting Licensing

What two reasons does the text give as to why FDI has outpaced world trade and world output? Fewer firms are participating in FDI based on homogeneity. Economic deregulation and privatization programs are on the decrease. FDI has been driven by political and economic changes in developing nations. Firms want to circumvent potential future trade barriers.

FDI has been driven by political and economic changes in developing nations. Firms want to circumvent potential future trade barriers.

A low-cost, no-frills grocery store chain that began in the United States decided to open similar stores in Germany which did not have any stores like this. What type of FDI is this company using? Licensing Greenfield investment Exporting Acquisition

Greenfield investment

What is a feature of an oligopoly? Independence of key firms Many large firms competing Low concentration ratio in the industry Interdependence of major players

Interdependence of major players

What are two characteristics of the eclectic paradigm? It argues that the key question of foreign direct investment is whether to choose a greenfield investment or an acquisition. It offers a good explanation of foreign direct investment in the 1980s and 1990s but is less successful at explaining more recent investment. It provides a single holistic explanation of foreign direct investment. It combines the best aspects of other theories of foreign direct investment into a single explanation.

It provides a single holistic explanation of foreign direct investment. It combines the best aspects of other theories of foreign direct investment into a single explanation.

The board of directors of Green Garden Supply in Vermont voted to invest in a production facility in Mexico as a way to lower costs and free up financial resources for the company to grow in other areas. What form of FDI is this company using? Offshore production correct Acquisition Greenfield investment Exporting

Offshore production

What are two reasons the United States has been an attractive target for FDI? Stable economy Small consumer divisions High tariffs Large domestic markets

Stable economy Large domestic markets

Which country has consistently been the largest source of FDI since World War II? France The United Kingdom The United States China

The United States

Which theory of foreign direct investment attempts to combine (1) the theories that focus on favoring direct investment when exporting and licensing are available and (2) theories that say certain locations are favored over others for FDI? Mercantilism The theory of comparative advantage Product life-cycle The eclectic paradigm

The eclectic paradigm

How has a shift toward democratic political institutions and free market economies affected FDI? These shifts have had no noticeable affect on FDI. These shifts cause decreases in FDI. These shifts encourage businesses to participate in FDI.

These shifts encourage businesses to participate in FDI.

In the past, most foreign direct investment has been directed at _____ nations. planned economy developing third-world developed

developed

Instead of FDI, a company could choose ______, which involves producing goods at home and shipping them overseas, or ______, which is granting a foreign firm the right to produce and sell a product in return for a royalty fee. licensing; exporting licensing; acquisitions acquisitions; exporting exporting; licensing

exporting; licensing

The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage. free market radical pragmatic nationalism laissez faire

free market

FDI occurs when a company invests in facilities that are adjacent to the home-country office. that have spillover knowledge. in a competitor's region. in a foreign country.

in a foreign country.

John Dunning proposed that ______ are an important factor when explaining the nature of foreign direct investment. multipoint competitors capital investments tariff barriers location-specific advantages

location-specific advantages

One cost to a host country related to FDI would be the _ (gain or loss?) of sovereignty and autonomy.

loss

A(n) ______ effect has occurred when a company's FDI of capital, technology, and management resources creates a positive contribution to a host country that might not otherwise be available. multipoint competition offshore production surplus account resource transfer

resource transfer

An example of the pragmatic nationalist view is that the host country can gain in jobs and skills and the profits go to the ______ country. host source

source