QUESTION Some economists have pointed out that the benefits of regional integration are determined by the extent of trade diversion, as opposed to trade creation. Indicate whether the statement is true or false. ANSWER FALSE Some economists have expressed concern that the benefits of regional integration have been oversold, while the costs have often […]
QUESTION As an incentive to encourage domestic firms to undertake FDI, many countries have: A. eliminated double taxation of foreign income. B. started imposing local content requirements. C. imposed higher import tariffs. D. abolished the use of custom duties. E. eliminated subsidies. ANSWER A
QUESTION Trade creation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. Indicate whether the statement is true or false. ANSWER FALSE Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. It may also occur when higher-cost external producers are […]
QUESTION Host governments use a range of controls to restrict inward FDI. The two most common are: A. monetary restraints and prohibition on investing in certain countries. B. voluntary export restrictions and employment restraints. C. ownership restraints and performance requirements. D. tax concessions and government-backed insurance. E. employment restraints and tax deductions. ANSWER C
QUESTION The European Union is by far more significant than the European Free Trade Association (EFTA), in terms of membership as well as economic and political influence in the world economy. Indicate whether the statement is true or false. ANSWER TRUE Europe has two trade blocs: the European Union (EU) and the European Free […]
QUESTION To encourage inward FDI, it is increasingly common for governments to: A. offer tax concessions to foreign firms that invest in their countries. B. exclude foreign companies from specific industries. C. require that local investors own a significant proportion of the equity in a joint venture. D. impose high custom duties on foreign firms. […]
QUESTION Which of the following is NOT an option, due to the fact that many services have to be produced where they are sold? A. FDI B. Franchising C. Greenfield investment D. Exporting E. Outsourcing ANSWER D
QUESTION Which of the following is a home-country policy for limiting outward FDI? A. Eliminating double taxation of foreign income B. Manipulating tax rules to encourage the firms to invest at home C. Withdrawing government-backed insurance programs provided to local investors D. Reducing interest rates earned on domestic investments E. Prohibiting organizations from entering into […]
QUESTION Although it normally involves much longer-term commitments, franchising is essentially the service industry version of: A. exporting. B. licensing. C. foreign direct investment. D. greenfield investment. E. diversifying. ANSWER B
QUESTION Firms for which licensing is not a good option include those in: A. low-technology industries. B. global oligopolies. C. industries characterized by low cost pressures. D. industries where transportation costs are high. E. industries which need to have low control over foreign operations. ANSWER B
