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
QUESTION As with free trade in general, regional economic integration creates gain for consumers, but it can be challenging for some producers. Indicate whether the statement is true or false. ANSWER TRUE By regional economic integration we mean agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers […]
QUESTION In a free trade area, all barriers to the trade of goods and services among member countries are removed and a common external trade policy is adopted. Indicate whether the statement is true or false. ANSWER FALSE In a free trade area, all barriers to the trade of goods and services among member […]
QUESTION A common market has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members. Indicate whether the statement is true or false. ANSWER TRUE A common market has no barriers to trade between member countries, includes a common external trade […]
QUESTION Which of the following is most likely to be the effect of FDI in the form of a greenfield investment on the host country? A. It drives down prices and increases the economic welfare of consumers. B. It raises unemployment levels. C. It causes firms to fight for scarce capital investments. D. It leads […]
