Quiz 7&8

UN estimates indicate that some _____ percent of all FDI inflows were in the form of mergers and acquisitions between 1998 and 2006.

40 to 80

Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to create the:

Andean Pact.

Nowhere has the movement toward regional economic integration been more successful than in:

Europe.

The most enduring free trade area in the world is the:

European Free Trade Association.

The _____, which plays an important role in the EU, has been directly elected by citizens of the EU countries since the late 1970s

European Parliament

Many now see the _____ as the emerging economic and political superpower of the same order as the United States and Japan.

European Union

There are now two trade blocs in Europe. These are the:

European Union and European Free Trade Association.

___ involves producing goods at home and then shipping them to the receiving country for sale.

Exporting

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?

Licensing

___ is credited with helping to create the background for increased political stability in Mexico.

NAFTA

Which of the following is NOT a home-country benefit source to FDI?

National sovereignty and autonomy of host countries is reduced.

NAFTA stands for:

North American Free Trade Association

Which of the following is NOT a home-country policy for limiting outward FDI?

Offering government-backed insurance programs to multinationals.

In general, which of the following makes licensing more profitable than FDI?

When the firm is unable to make any large investments at the time.

In theory, _____ rules should ensure that a free trade agreement does not result in trade diversion.

World Trade Organization

EU critics argue that the Euro will unleash enormous pressures for tax harmonization and fiscal transfers from the center, which cannot be pursued without the appropriate political structure. In their view:

a single currency should follow a political union.

By 2008, _____ WTO members had notified the organization of participation in one or more regional trade agreements.

almost all

Which of the following was NOT one of the purposes of the Single European Act?

Remove the principle of "mutual recognition" as it pertains to product standards.

According to the text, a firm will favor FDI over exporting as an entry strategy when:

the transportation costs or trade barriers are high.

Some firms undertake foreign direct investment as a response to actual or threatened:

trade barriers.

When _____ costs are added to production costs, it becomes unprofitable to ship products that have low value-to-weight ratios.

transportation

Because many governments have accepted part or all of the case for intervention, _____ have proved to be only an ideal.

unrestricted free trade and FDI

Which of the following makes it harder for euro zone exporters to sell their goods abroad?

A strong euro

Which of the following has the highest level of integration?

An economic union

Which of the following was NOT a content of NAFTA?

Abolition on 100 percent of barriers on goods traded between Mexico, Canada, and the United States.

The inability of _____ to attract greater investment is in part a reflection of the political unrest, armed conflict, and frequent changes in economic policy in the region.

Africa

MERCOSUR originated in 1988 as a free trade pact between:

Brazil and Argentina.

In 1992, the _____ won the right to opt out of any single currency agreement.

British

Formed in 1967, ASEAN currently includes:

Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

Which of the following EU countries has stayed out of euro zone because of an implied loss of national sovereignty?

Denmark

The specter of the _____ turning into economic fortresses that shut out foreign producers with high tariff barriers is worrisome to those who believe in unrestricted free trade.

EU and NAFTA

Which of the following is NOT a benefit of the Euro?

EU having an advantage of being an optimal currency area and hence increased interest rates.

Until the collapse of communism between 1989 and 1991, the countries of _____ were opposed to FDI

Eastern Europe

If a firm wants to avoid bearing the costs of establishing production facilities in a foreign country, which of the following would be LEAST advisable?

FDI

By limiting imports through quotas, governments increase the attractiveness of:

FDI and licensing.

Why would a firm prefer to acquire an existing asset instead of executing a greenfield investment?

Firms believe that they need to acquire the desirable target firm before the rivals.

Which of the following is a risk/problem associated with FDI?

Firms must bear the cost of establishing a facility in a foreign country where rules of the game may be different.

Where does the European Parliament meet at in the European Union?

France

Which of the following is NOT a key economic criterion for a country to join the EU?

High tourism revenues

How does increased competition through FDI affect the host country?

It drives down prices and increases the economic welfare of consumers.

Which institution is comprised of one judge from each country, and is the supreme appeals court for EU law?

The Court of Justice

__ now has the right to vote on the appointment of commissioners as well as veto some laws.

The European Parliament

Which of the following is NOT one of the four main institutions in the political structure of the European Union?

The European Social Committee

As per the free market view, how does FDI by the MNE increase the efficiency of world economy?

The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe.

According to the radical view, which of the following countries benefits most from FDI?

The US

Which theory helps explain how location factors affect the direction of FDI?

The eclectic paradigm theory

Which of the following are three of the main benefits of inward FDI for a host country?

The resource-transfer effect, the employment effect, and the balance-of-payments effect.

___ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

Trade diversion

In December 2002, the EU formally indicated that it would allow the _____ application to proceed with no further delay in December 2004 if the country improved its human rights record to the satisfaction of the EU.

Turkish

A country's _____ tracks both its payments to and its receipts from other countries.

balance-of-payments account

The European Commission's role in _____ policy has become increasingly important in recent years.

competition

The two main reasons that have made economic integration difficult to achieve are:

concerns over costs and concerns over national sovereignty.

When a country is importing more goods and services than it is exporting, it is incurring a:

current account deficit.

A _____ eliminates trade barriers between member countries and adopts a common external trade policy.

customs union

Knowledge spillovers that occur when companies in the same industry locate in the same area is:

externalities.

The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year). The _____ of foreign direct investment refers to the total accumulated value of foreign-owned assets at any time.

flow; stock

FDI is an acronym that stands for:

foreign direct investment.

The _____ view argues that international production should be distributed among countries according to the theory of comparative advantage.

free market

In a _____, theoretically, no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members.

free trade area

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

greenfield investment.

The development of a pan-European, euro-denominated capital market will increase the range of investment open to:

individuals and institutions.

During the establishment stage, The European Free Trade Association's emphasis has been on free trade in:

industrial goods.

The United States has been an attractive target for FDI because all of the followingEXCEPT:

it has an unstable and stagnated economy.

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:

licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.

During the past 30 years, there has been a(n):

marked increase in both the flow and stock of FDI in the world economy.

The principle argument of those who opposed NAFTA centered on the fear that ratification would result in:

mass exodus of jobs from the United States into Mexico.

When two or more enterprises encounter each other in different regional markets, national markets, or industries, _____ arises.

multipoint competition

An industry composed of a limited number of large firms is referred to as a(n):

oligopoly.

According to Raymond Vernon, firms undertake FDI at:

particular stages in the life cycle of a product they have pioneered.

A central political apparatus that coordinates the economic, social, and foreign policy of its member states is a(n):

political union.

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk. The types of risks insurable through these programs include all of the following EXCEPT:

poor strategic tie-ups.

In a _____ view, FDI should be allowed only if the benefits outweigh the costs.

pragmatic nationalism

An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other is referred to as:

regional economic integration.

The only way in which a current account deficit can be supported in the long run is by:

selling assets to foreigners.

The European Community became the European Union with the signing of:

the Maastricht Treaty.

During the 1980s and 1990s, _____ was often the favorite target for FDI inflows.

the United States

Location-specific advantages are:

the advantages that arise from utilizing resource assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets.

Regarding the costs of FDI for the home country, the most important concerns center around:

the balance-of-payments and employment effects of outward FDI.

A major reason for _____ in October 2000 was that international investors were investing money in booming U.S. stocks and bonds and taking money out of Europe to finance these investments.

the fall of the euro's value

Three main costs of inward FDI concern host countries. These are:

the possible adverse effects of FDI on competition, adverse effects on the balance of payments, and the perceived loss of national sovereignty and autonomy.