ECO 116, Chapter 8 Review Quiz
As an incentive to encourage domestic firms to undertake FDI, many countries have:
A eliminated double taxation of foreign income.
A firm is most likely to favor foreign direct investment over exporting when:
B . the firm wishes to maintain control over its operations and business strategy.
Which of the following statements regarding the free market view is true?
B The free market view argues that FDI is a benefit to both the source country and the host country.
A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:
C . foreign direct investment
The WTO embraces the promotion of international trade in services.
T
Which of the following arises when two or more enterprises encounter each other in different regional markets, national markets, or industries?
D Multipoint competition
Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category of:
D resource transfer effects.
Which of the following products has a low value-to-weight ratio?
E . Cement
Dunning's theory helps explain:
E how location factors affect the direction of FDI.
A current account deficit is also known as a(n):
E trade deficit.
Which of the following states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI, and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located?
Eclectic paradigm
According to the pragmatic nationalist view, no country should ever permit foreign corporations to undertake FDI.
F
Historically, most FDI has been directed at the least developed nations of the world.
F
Offshore production refers to FDI undertaken to serve the host market.
F
By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.
T
Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic stance toward FDI.
T
Economists refer to knowledge "spillovers" as externalities, and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.
T
The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.
T
Although it normally involves much longer-term commitments, franchising is essentially the service industry version of:
B licensing.
Which of the following statements is true regarding foreign direct investment?
B. FDI has grown more rapidly than world trade and world output.
