Deck 8: Multinational Corporations in the Global Economy

Question 1

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.

Answer 1

B

Question 2

According to UNCTD figures in the Oatley book,foreign direct investment (FDI)inflows have grown from $180.5 billion in 1986-91 to about

A) $500 billion in 2007-2008.
B) $900 billion in 2007-2008.
C) $2 trillion in 2007-2008.
D) $3 trillion in 2007-2008.
E) $4 trillion in 2007-2008.

Answer 2

C

Question 3

According to UNCTD figures in the Oatley book,foreign direct investment (FDI)outflows have grown from $80.5 billion in 1986-91 to about

A) $ 500 billion in 2007-2008.
B) $ 1 trillion in 2007-2008.
C) $ 1.5 trillion in 2007-2008.
D) $ 2.0 trillion in 2007-2008.
E) $ 3.0 billion in 2007-2008.

Answer 3

D

Question 4

In 2008,advanced industrial countries accounted for about

A) 27% of all MNC parent corporations.
B) 45% of all MNC parent corporations.
C) 73% of all MNC parent corporations.
D) 89% of all MNC parent corporations.
E) 8% of all MNC parent corporations.

Question 5

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.

Question 6

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.

Question 7

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.

Question 8

According to Table 8.1 in the Oatley book,the region of the world with the highest foreign direct investment inflows in 2007-2008 was

A) The European Union.
B) North America.
C) Southeast Asia.
D) Latin America.
E) Africa.

Question 9

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.

Question 10

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.

Question 11

According to Table 8.4,in 2007 the top two industrial sectors of the 100 largest MNCs were

A) electronics/computers and food/beverages/tobacco.
B) motor vehicles/parts and petroleum/mining.
C) pharmaceuticals and telecommunications.
D) petroleum/mining and utilities.
E) electronics/computers and telecommunications.

Question 12

Since 1969,the number of firms engaged in international production as increased by

A) three fold.
B) five fold.
C) seven fold.
D) nine fold.
E) eleven fold.

Question 13

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.

Question 14

According to the Oatley book, the United Nations (UN)estimates that MNCs currently

A) account for 1/4 of global exports and employ some 57 million people worldwide.
B) account for 1/3 of global exports and employ some 77 million people worldwide.
C) account for 1/3 of global exports and employ some 107 million people worldwide.
D) account for ½ of global exports and employ some 107 million people worldwide.
E) account for ½ of global exports and employ some 117 million people worldwide.

Question 15

According to Table 8.1 in the Oatley book,the region of the world with the highest foreign direct investment outflows in 2007-2008 was

A) The European Union.
B) North America.
C) Southeast Asia.
D) Latin America.
E) Africa.

Question 16

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.

Question 17

According to the UN,over ¼ of the world's MNC parent firms in 2008 were based in developing countries.As a group,the 100 largest MNCs from developing countries,however,control only about

A) 5% of the foreign assets controlled by the largest 100 MNCs based in the advanced industrial countries.
B) 60% of the foreign assets controlled by the largest 100 MNCs based in the advanced industrial countries.
C) 45% of the foreign assets controlled by the largest 100 MNCs based in the advanced industrial countries.
D) 20% of the foreign assets controlled by the largest 100 MNCs based in the advanced industrial countries.
E) 75% of the foreign assets controlled by the largest 100 MNCs based in the advanced industrial countries.

Question 18

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.

Question 19

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.

Question 20

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.

Question 21

Why do MNCs remain overwhelmingly concentrated in the advanced industrial countries?

Question 22

Explain where,how and why some developing countries are becoming both the host of foreign firms and home to domestic MNCs.

Question 23

MNCs started as British creations that first appeared shortly before WW I.

Question 24

Locational advantages in efficiency-oriented investments arise from the availability at a lower cost of the factors of production that are used intensely in the production of a specific product.

Question 25

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.

Question 26

Describe and explain how MNCs have grown so quickly in the past 40 years.

Question 27

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.

Question 28

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.

Question 29

Although MNCs have a global reach,their activities are overwhelmingly concentrated in the advanced industrial countries.

Question 30

In 2008,about half of the top 100 MNCs from developing countries came from Southeast or East Asia.

Question 31

Explain the concept of locational advantages and historically their three specific country characteristics.

Question 32

Describe and compare the volume and location of foreign direct investment (FDI)from 1986 to 2008.

Question 33

Vertical integration refers to instances in which firms internalize their transactions for intermediate goods.

Question 34

Multinational corporations (MNCs)highlight the tensions inherent in an economy that is increasingly organized along global lines and political systems that continue to reflect exclusive national territories.

Question 35

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.

Question 36

According to Oatley,the prevalence and organization of MNCs is puzzling to neoclassical economists.

Question 37

Since the late 1980s,MNCs have been investing more heavily in developing countries.

Question 38

Locational advantages for market-oriented investments arise from the presence of large deposits of a particular natural resource in a foreign country.

Question 39

In the last forty years,the number of firms engaged in international production has increased about tenfold.

Question 40

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.

Question 41

Describe,explain and give examples of the differences between market imperfections and locational advantages of MNCs.

Question 42

Describe,explain and give examples of the differences between horizontal and vertical integration of the activities of MNCs.

Question 43

What role do technology transfers play in assessing the pros and cons of MNCs' contributions to economic interactions between developing and advanced industrial countries?

Question 44

Explain and give examples of the differences between positive and negative externalities as a result of MNC activity in a host country.

Question 45

Describe the dilemmas for host countries of inviting MNC foreign investments into their economies.