IB Questions

Most economists _____ the idea that FDI is usually accompanied by some loss of economic independence.

dismiss

Simple Services Corp. is considering FDI in Japan. However, Simple Services wants to keep tight control over the foreign entity to ensure it will achieve maximum earnings in Japan. Which form of FDI would be better for the company to use?

exporting

The idea that an MNE could come into a country and monopolize a market tends to be a greater concern in countries that have

few large firms of their own.

Performance requirements are put in place to minimize the costs of FDI for the Blank country. (Choose investor or host.)

host

Fears of "economic ransom" are irrational, according to Robert Reich, because of the growing ______ of the world economy.

interdependence

The only way a country can support a current account deficit, also known as a trade deficit, in the long-run is to _____.

sell off assets to foreigners

Critics argue that FDI by Japanese auto makers does not make up for the jobs lost in US-based auto manufacturers. These critics are concerned with the

substitution effect.

True or false: An acquisition is considered beneficial because it effectively reduces the number of businesses in a market.

False

True or false: The World Trade Organization has been successful in its efforts to establish a universal set of rules governing the liberalization of FDI.

False

Which company demonstrates a successful franchising, strategy?

McDonald's

What is a potential adverse impact on competition when a foreign entity acquires firms in a host country?

Monopoly

What two measures can countries employ to restrict foreign direct investment?

Ownership restraints Performance requirements

ABC Co. should choose exporting over licensing as a form of FDI if it has ______ transportation costs and is facing ______ trade barriers.

low; low

Ownership restraints on FDI are often put into place by a host country based on concerns of

national security.

A(n) ______ effect has occurred when a company's FDI of capital, technology, and management resources create a positive contribution to a host country that might not otherwise be available.

resource transfer

Ownership restraints and performance requirements are two ways in which governments can Blank FDI.

restrict

When a country maintains a current account, (deficit or surplus?), it is unlikely to have to sell off assets in order to balance accounts.

surplus

The World Trade Organization has based the majority of its efforts on pushing for the liberalization of regulations governing ______.

the service industry