QUESTION When a firm exports its products to a foreign country, foreign direct investment occurs. Indicate whether the statement is true or false. ANSWER FALSE Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce or market a product in a foreign country. According to the U.S. Department of Commerce, […]
QUESTION The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio. Indicate whether the statement is true or false. ANSWER FALSE The viability of an exporting strategy is often constrained by transportation costs and trade barriers. When transportation costs are added to production costs, it becomes […]
QUESTION By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing. Indicate whether the statement is true or false. ANSWER TRUE Transportation costs aside, some firms undertake foreign direct investment as a response to actual or threatened trade barriers such as import tariffs or […]
QUESTION By limiting imports through quotas, governments reduce the attractiveness of FDI and licensing. Indicate whether the statement is true or false. ANSWER FALSE By limiting imports through quotas, governments increase the attractiveness of FDI and licensing. For example, the wave of FDI by Japanese auto companies in the United States during the 1980s […]
QUESTION According to the free market view, countries should specialize in the production of those goods and services that they can produce most efficiently. Indicate whether the statement is true or false. ANSWER TRUE The free market view argues that international production should be distributed among countries according to the theory of comparative advantage. […]
QUESTION According to the pragmatic nationalist view, no country should ever permit foreign corporations to undertake FDI. Indicate whether the statement is true or false. ANSWER FALSE According to the radical view, no country should ever permit foreign corporations to undertake FDI, since they can never be instruments of economic development, only of economic […]
QUESTION The United States accused Libya and Iran of supporting terrorist action and building weapons of mass destruction. The U.S. government, therefore, imposed trade sanctions against the two countries. Which of the following political arguments does this exemplify? A. Retaliation and trade war B. Furthering foreign policy objectives C. Strategic trade policy D. Corporate security […]
QUESTION Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets, or industries. Indicate whether the statement is true or false. ANSWER TRUE Knickerbocker’s theory can be extended to embrace the concept of multipoint competition. Multipoint competition arises when two or more enterprises encounter each other in […]
QUESTION One of the main reasons why many economists remain critical of the infant industry argument is its reliance on the assumption that: A. protection of manufacturing from foreign competition is harmful. B. absolute advantage cannot sustain productivity of an industry. C. foreign firms too come under the definition of infant industry when they newly […]
QUESTION Many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with well-established industries in developed countries, according to: A. economic development argument. B. comparative advantage theory. C. national security argument. D. infant industry argument. E. mixed economy theory. ANSWER D
