Question Bank for B.Bongo

Which of the following rules are not trade-related investment measures (TRIMs)?

a. Domestic-content rules b. Trade balancing measures that require a firm's imports be offset by its exports c. Restrictive foreign exchange practices d. Constraints on the ability to link investment incentives to export-performance requirements e. Full Compensation for expropriated properties#

In the 1950s and 1960s the principal sources of foreign capital for developing countries were

a. FDI and foreign aid and neither was abundant.# b. SWF and foreign aid and neither was abundant. c. FDI which was abundant and foreign aid which was not. d. foreign aid which was abundant and FDI which was not. e. FDI and foreign aid and both were abundant.

Historically, international rules governing FDI have been based on the following legal principles:

a. Foreign investments are private property but are treated less favorably than domestic private property. b. Governments have no right to expropriate foreign investments for a public purpose. c. Governments must compensate the owner for the full value of the expropriated property.# d. The home country of the foreign investors must forcefully retaliate in the disputed host country's economy. e. Expropriation, like foreign

Regulatory arbitrage is seen by critics as a "race to the bottom". This means that

a. MNCs may shift activities out of stringent countries into less stringent countries.# b. MNCs may shift activities out of less stringent countries into more stringent countries. c. MNCs will demand no regulations on their activities. d. MNCs will refuse to follow regulations that are imposed on domestic firms. e. countries will not compete with each other for the least regulations on MNCs.

According to Oatley, which of the following concerns about SWFs seems to be the least important among those held by increasing numbers of American and European policymakers?

a. National security implications.# b. Lack of transparency in operations. c. Absence of a common regulatory framework. d. Lack of knowledge of what motivates their purchases. e. Potentially destabilizing trading activity.

Which of the following regulations were not performance requirements on MNC affiliates?

a. Required percentage of inputs from domestic suppliers. b. Required percentage of exports. c. Required percentage of research and development inside host country. d. Limits on repatriation of profits.# e. Limits on access to local capital markets.

Locational advantages are based on which combination of the following specific country characteristics:

a. a large reserve of natural resources, a large local market and efficiency opportunities.# b. a small reserve of natural resources, a large local market and efficiency opportunities. c. a small reserve of natural resources, a small local market and efficiency opportunities. d. a large reserve of natural resources, a small local market and efficiency opportunities. e. a small reserve of natural resources, a large local market but few efficiency opportunities.

Foreign investment

a. allows a country only to grow when it does not compete with its domestic savings. b. allows a country to enjoy faster growth than would be possible if it were forced to rely solely on its domestic savings.# c. only allows as much growth as desired by foreign management. d. usually replaces domestic savings leading to excessive external indebtedness. e. is usually the least stable and most burdensome for host countries.

Specific assets

a. are investments that are part of a general economic relationship. b. are investments that are dedicated to a particular short-term economic relationship. c. are assets that create incentives for vertical integration because it is difficult to write and enforce long-term contracts.# d. are assets whose value is derived from locational advantages that are crucial to the production in a particular industry. e. are assets that create incentives for horizontal integration because they make it easier to write and enforce contracts.

Nationalization was common during the late 1960s and the first half of the 1970s. Nationalizations occurred most often in

a. banking and transportation. b. banking and public utilities. c. transportation and extractive industries. d. banking and extractive industries. e. extractive industries and public utilities.#

MNC investment in the developing world has increased during the last 30 years,

a. but the majority of this investment has been concentrated in a very few number of developing countries.# b. and the majority of this investment has been spread out among many developing countries. c. and the majority of this investment has gone to the Middle East. d. and the majority of this investment has gone to the Africa. e. and the majority of this investment has gone to Asia.

Locational incentives are packages host countries offer to MNCs that

a. decrease the profits of a particular investment. b. increase the costs of that investment. c. increase the risk of that investment. d. provide subsidized loans for that investment.# e. depreciate their investments at slower rates.

Advanced industrial countries have been less vulnerable to foreign domination than developing countries because

a. developing countries have larger economies. b. developing countries have more diversified economies. c. foreign affiliates are more likely to face competition from domestic firms in a developing country. d. developing countries have felt less compelled to regulate MNC activity. e. foreign affiliates are more likely to face competition from domestic firms in a advanced industrial country.#

Positive externalities arise when

a. economic actors in the host country that are directly involved in the transfer of technology from a MNC to a local affiliate do not benefit from this transaction. b. economic actors in the host country that are not directly involved in the transfer of technology from a MNC to a local affiliate do not benefit from this transaction. c. economic actors in the home country that are directly involved in the transfer of technology from a local affiliate to a MNC also benefit from this transaction. d. economic actors in the home country that are not directly involved in the transfer of technology from a local affiliate to a MNC do not benefit from this transaction. e. economic actors in the host country that are not directly involved in the transfer of technology from a MNC to a local affiliate also benefit from this transaction.#

Horizontal integration occurs when a

a. firm creates singular country production facilities, each of which produces different good or goods. b. firm creates multiple production facilities, each of which produces the same good or goods.# c. firm creates multiple production facilities, each of which produces different good or goods. d. firm creates singular country facilities, each of which produces the same good or goods. e. firm creates multiple production facilities, in multiple countries but with different technologies.

The expansion of foreign aid programs during the 1960s reflected changing attitudes in advanced industrial countries as largely a product of the dynamics of

a. globalization. b. decolonialization.# c. commonwealth. d. free trade. e. sovereign wealth funds.

The reason why there are no comprehensive international investment rules is that

a. governments have never tried to create multilateral rules. b. the OCED and WTO rules have already created effective comprehensive guidelines. c. conflict between capital-exporting advanced industrial countries and the capital importing developing countries has prevented agreement on such rules.# d. conflict between capital-exporting developing countries and the capital-importing advanced industrial countries has prevented agreement on such rules. e. MNCs have already created rules on their own initiative.

The politics of MNCs emerge from the competing interests of

a. host countries of MNCs. b. home countries of MNCs. c. the MNCs themselves. d. host countries and home countries. e. host countries and home countries and the MNCs themselves.

Export-processing zones are industrial areas set aside for MNCs with special rules or subsidies. Foreign firms based in EPZs are primarily allowed to

a. import components free of taxes, as long as all of their output is exported.# b. pay workers less than elsewhere in the country. c. pay workers more than elsewhere in the country. d. Ignore safety and environmental regulations. e. import components for assembly free of taxes, as long as none of their output is exported.

When foreign direct investments are made part of a global production network such integration

a. insures that import opportunities will not be available to indigenous producers. b. insures that MNCs will reduce the amount of funds available for investments in the host country. c. insures that revenues generated by the local affiliate will not be used to enhance the welfare of the host country. d. creates export opportunities that would be otherwise unavailable to indigenous producers.# e. guarantees that technology will not eventually be transferred to the host country.

The central political concern for developing countries regarding MNCs ownership of critical natural-resource industries was that

a. it compromised the hard-won national autonomy achieved in the struggle for independence. # b. governments would be unable to use these resources to promote ISI strategies. c. extractive industries did not usually transfer technology. d. extractive industries used primarily foreign workers so that skills were obtained by domestic workers. e. extractive industries accelerated the depletion of non-renewable resources.

Falling trade barriers and improvements in communications technology have made

a. it substantially harder for firms to internationalize their activities. b. it substantially easier for firms to internationalize their activities. c. very little difference for firms wishing to internationalize their activities. d. it more likely for MNCs to systematically exploit workers worldwide. e. it easier for MNCs to avoid paying taxes on their international activities.

We expect to find the most amount of MNC activity when

a. locational advantages exist, but there are neither intangible nor specific assets. b. no locational advantages exist, but there are intangible and specific assets. c. no locational advantages exist, and there are neither intangible nor specific assets. d. locational advantages exist, and there are both intangible and specific assets.# e. there are vertically integrated intangible assets.

A national company becomes an MNC when it

a. makes a foreign investment.# b. takes out a foreign loan. c. imports a foreign product. d. exports a foreign product. e. hires foreign workers.

Historically, developing countries have hosted

a. many MNC corporations but the amount of FDI has been relatively small. b. some MNC corporations but the amount of FDI has been relatively small.# c. few MNC corporations but the amount of FDI has been relatively large. d. many MNC corporations and the amount of FDI has been relatively large. e. some MNC corporations and the amount of FDI has been relatively large.

Multinational corporations (MNCs) are

a. not the primary drivers of and beneficiaries from globalization. b. the primary drivers of but not the beneficiaries from globalization. c. the primary drivers of and beneficiaries from globalization# d. the beneficiaries from globalization but not its primary drivers. e. a recent invention.

Intangible assets are

a. not very important when cost advantages arise from horizontal administrative integration. b. something whose value is not very important. c. assets whose value is derived from locational advantages that are crucial to the production in a particular industry. d. assets that are easy to sell or license to other firms at a price that accurately reflects their true value. e. assets that are difficult to sell or license to other firms at a price that accurately reflects their true value.#

MNCs usually enjoy more bargaining power than host countries in low-skilled labor intensive manufacturing industries because

a. only a few developing countries have excess low skilled labor. b. investments in low-skilled manufacturing entail a relatively low amount of fixed capital.# c. investments in low-skilled manufacturing cannot be readily moved out of a particular country. d. technology in many manufacturing industries changes rapidly and, therefore, is easily transferred to host workers. e. like natural-resource investments, manufacturing investments can become hostages.

Sovereign wealth funds (SWFs) are

a. royalty-owned funds that purchase private assets in foreign markets. b. royalty-owned funds that purchase public assets in foreign markets. c. government-owned funds that purchase public assets in domestic markets. d. government-owned funds that purchase private assets in domestic markets. e. government-owned funds that purchase private assets in foreign markets.#

Locational advantages for market-oriented investments are based on the ideal combination of

a. small fast growing markets, large number of indigenous firms in that industry and tariff/nontariff barriers. b. large fast growing markets, small number of indigenous firms in that industry and no tariff/nontariff barriers. c. large fast growing markets, small number of indigenous firms in that industry and tariff/nontariff barriers. # d. large fast growing markets, large number of indigenous firms in that industry and no tariff/nontariff barriers. e. large slow growing markets, small number of indigenous firms in that industry and tariff/nontariff barriers.

Obsolescing bargaining power happens when

a. the MNC can easily remove its fixed investment from the country. b. uncertainty about of the return on the investment stays high. c. technology has been significantly transferred to the host country workers.# d. technology has not been significantly transferred to the host country workers. e. the MNC has monopoly control over the necessary capital.

Many MNCs have opted to remove many of their international transactions from the market and place them within a single corporate structure because

a. they are usually required to by the host country governments. b. they are usually required to by the home country governments. c. they can usually earn substantially higher incomes by internalizing intangible and specific assets.# d. they will not be held accountable for raising the general welfare of their host countries. e. this helps them stay clear of intrusive host government regulations.

Transfer pricing takes place when MNCs require the local affiliate

a. to purchase inputs from other subsidiaries at prices the parent sets to maximize its global profits.# b. to purchase inputs from other domestic suppliers at competitive local prices. c. to replace local managers to foreign managers. d. to pay fees for any technology that is transferred. e. to drive established host-country firms out of business.