Question 1

American labor unions maintain that U.S.multinational enterprises

Accepted Answer

American labor unions believe that U.S. multinational enterprises export American jobs by investing overseas, as these companies often set up factories or outsource services to countries with lower labor costs. This can result in a loss of jobs in the United States, particularly in manufacturing and other industries where outsourcing is common.

Question 2

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.Assume Venture Company's formation yields new cost reductions, indicated by MC₁=AC₁, which result from changes in work rules by Venture Company employees that led to higher worker productivity.Compared to the original competitive equilibrium, the net effect of Venture Company's formation on welfare now is

Accepted Answer

The formation of the Venture Company leads to a reduction in costs due to increased worker productivity, which shifts the industry supply curve from S1 to S'1. The new equilibrium price is P1 and quantity is Q1. Compared to the original competitive equilibrium, both consumer surplus and producer surplus have increased. The gain in consumer surplus is represented by the area A+B+C and the gain in producer surplus is represented by the area D+E+F. The total gain in welfare is therefore the sum of the gains in consumer and producer surplus, which is $5.50 (A+B+C+D+E+F). Therefore, the net effect of Venture Company's formation on welfare is a gain of $5.50.

Question 3

Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000.This practice is BEST referred to as

Accepted Answer

The practice described in the scenario is known as transfer pricing, which refers to the price set for goods or services transferred between different units or subsidiaries within the same company or group. In this case, General Motors is charging its Mexican subsidiary an inflated price for the equipment, likely to transfer profits out of the country, avoid taxes, or manipulate financial statements. This practice can be legal if the prices are aligned with market prices and conducted at arm's length, but unethical or illegal if they are not. International dumping refers to the selling of goods below cost to gain a competitive advantage, and cost-plus pricing is a method of setting prices based on costs and a markup. Technological transfer refers to the sharing of knowledge, skills, or technology between companies, countries, or institutions.

Question 4

Most of Toyota's auto plants in the United States are located in

Accepted Answer

Toyota's auto plants in the US are predominately located in southern states such as Tennessee, Kentucky, and Alabama.

Question 5

Multinational enterprises may provide benefits to their SOURCE (home) countries because they may

Accepted Answer

Multinational enterprises may provide benefits to their source (home) countries by securing raw materials, which could be used to support the production of goods and services in the source country. This could help in the creation of jobs, addition of value to produce goods and services, and contribute to the economy's growth. Option B, C, and D do not necessarily provide direct benefits to the source country.

Question 6

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.Compared to the market equilibrium position achieved by SKG and Timken as competitors, Venture Company as a monopoly leads to a deadweight welfare loss at

Accepted Answer

The answer of Figure 9.1 illustrates the market conditions facing...

Question 7

Which business device involves the creation of a new business by two or more companies, often for a limited period of time?

Accepted Answer

An international joint venture involves the creation of a new business entity by two or more companies from different countries. This joint venture is usually established for a specific purpose or project and for a limited period of time. The companies involved share ownership, control, and profits of the joint venture.

Question 8

Multinational enterprises

Accepted Answer

Multinational enterprises increase the transfer of technology between nations as they operate across borders and bring technology and best practices from their home country to the countries where they operate. This can lead to greater innovation and economic growth in those countries.

Question 9

Since the 1980s, Japanese auto companies have invested billions of dollars in U.S.based assembly facilities, known as transplants.This investment is explained by all of the following EXCEPT the desire to

Accepted Answer

All the options provided (A, B, and C) are legitimate reasons for Japanese auto companies to invest in U.S.-based assembly facilities, thus making option D correct as it states that all these reasons are correct.

Question 10

The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions.Which type of cost reduction would NOT lead to offsetting welfare gains for the overall economy?

Accepted Answer

Lower wages extracted from workers may lead to cost reductions for the joint venture, but it is not a sustainable or desirable way to generate long-term welfare gains for the overall economy. It can lead to lower consumer purchasing power and lower standards of living for workers, resulting in overall welfare losses. The other options (research and development generating improved technology, development of more productive machinery, and new work rules promoting worker efficiency) can lead to sustainable cost reductions and long-term welfare gains for the overall economy.

Question 11

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.Suppose that SKG and Timken jointly form a new firm, Venture Company, whose ball bearings replace the output sold by the parents in the domestic market.Assuming that Venture Company operates as a monopoly and that its costs equal MC₀=AC₀, the firm's price, output, and total profit would respectively equal

Accepted Answer

The correct answer involves understanding basic monopoly pricing and output decisions. A monopoly will set its price above marginal cost to maximize profit, leading to a higher price and lower output compared to competitive markets. The given profit figure also aligns with the monopoly's behavior of maximizing profit, which is achieved by setting a price that exceeds marginal and average costs.

Question 12

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.With SKF and Timken behaving as competitors, the equilibrium price and output respectively equal

Accepted Answer

In a competitive market, firms will produce where marginal costs equal marginal revenue. Without the specific details of Figure 9.1, a common outcome in such scenarios is for firms to settle on a price that reflects the combined marginal costs and demand, leading to an equilibrium where both the price and quantity are adjusted to meet at a point where the market demand is satisfied at an efficient price. Given the options, $4 and 4 units suggest a scenario where both firms have adjusted their output to meet at a competitive equilibrium, assuming that the combined output of SKF and Timken meets the market demand at this price point.

Question 13

International joint ventures can lead to welfare losses when the newly established firm

Accepted Answer

When an international joint venture gives rise to increased amounts of market power, it can lead to welfare losses due to the potential for anti-competitive behavior, higher prices, and reduced consumer welfare. However, joint ventures that result in cost reductions or entry into new markets can potentially lead to welfare gains.

Question 14

Figure 9.2 represents the U.S. labor market. Assume that labor and capital are the only factors of production. Also assume the initial supply schedule of labor is denoted by S0 and consists entirely of native U.S. workers. The demand schedule of labor is denoted by D0.
?  ?

-Consider Figure 9.2, at labor market equilibrium, _____ workers are hired at a wage rate of $____ per hour, while total labor income equals $____.

Accepted Answer

The answer of Figure 9.2 represents the U.S. labor market....

Question 15

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.At the equilibrium price, the domestic economy attains ____ of economic surplus.

Accepted Answer

The answer of Figure 9.1 illustrates the market conditions facing...

Question 16

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.Assume Venture Company's formation yields new cost reductions, indicated by MC₁=AC₁, which result from wage concessions accepted by Venture Company employees.Compared to the original competitive equilibrium, the net effect of Venture Company's formation on welfare now is

Accepted Answer

The answer of Figure 9.1 illustrates the market conditions facing...

Question 17

Multinational enterprises face problems since they

Accepted Answer

Multinational enterprises may face political problems in countries where their subsidiaries operate due to issues such as cultural differences, conflicting laws and regulations, and differing economic policies.

Question 18

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.Assume Venture Company's formation yields new cost reductions, indicated by MC₁=AC₁, which result from technological advances.Compared to the original competitive equilibrium, the net effect of Venture Company's formation on welfare now is

Accepted Answer

The formation of Venture Company and the resulting cost reductions due to technological advances typically lead to increased efficiency and lower costs for consumers. This can enhance overall welfare by making products or services more affordable and accessible, thus leading to a welfare gain.

Question 19

Which term best describes the Iran Oil Investment Co.?

Accepted Answer

The Iran Oil Investment Co. is described as an international joint venture, as it is a partnership between multiple countries' companies.

Question 20

All of the following are potential advantages of an international joint venture EXCEPT

Accepted Answer

Operating at diseconomy-of-scale output levels is not an advantage of an international joint venture but rather a disadvantage. It means that the joint venture is not achieving efficient levels of production and may be incurring higher costs than necessary. The other options listed are potential advantages of international joint ventures.

Quiz 9: International Factor Movements and Multinational Enterprises

American labor unions maintain that U.S.multinational enterprises

Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000.This practice is BEST referred to as

Most of Toyota's auto plants in the United States are located in

Multinational enterprises may provide benefits to their SOURCE (home) countries because they may

Which business device involves the creation of a new business by two or more companies, often for a limited period of time?

Multinational enterprises

Since the 1980s, Japanese auto companies have invested billions of dollars in U.S.based assembly facilities, known as transplants.This investment is explained by all of the following EXCEPT the desire to

The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions.Which type of cost reduction would NOT lead to offsetting welfare gains for the overall economy?

International joint ventures can lead to welfare losses when the newly established firm

Multinational enterprises face problems since they

Which term best describes the Iran Oil Investment Co.?

All of the following are potential advantages of an international joint venture EXCEPT