Question 1

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

Accepted Answer

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Question 2

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

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Question 3

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

Accepted Answer

Multinational corporations (MNCs) have existed for centuries, with the Dutch East India Company, founded in 1602, often cited as the first true multinational corporation. This predates the timeline of just before World War I by several centuries.

Question 4

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.

Accepted Answer

Locational advantages in efficiency-oriented investments are dependent on the availability of factors of production that are used intensely in the production of a particular product. If a certain location has these factors available at a lower cost, then it is advantageous to invest in that location for producing that specific product.

Question 5

Foreign investment

Accepted Answer

Foreign investment allows a country to enjoy faster growth than would be possible if it were forced to rely solely on its domestic savings. This is because foreign investment provides capital, technology, and managerial expertise that can accelerate economic growth.

Question 6

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

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Question 7

Many MNCs have opted to remove many of their international transactions from the market and place them within a single corporate structure because

Accepted Answer

MNCs opt to remove many of their international transactions from the market and place them within a single corporate structure because they can usually earn substantially higher incomes by internalizing intangible and specific assets. This helps them to reduce transaction costs and take advantage of economies of scale. Moreover, it allows them to control the transfer of technological knowledge, proprietary expertise, and intellectual property within the organization, thereby reducing the risk of leakage or theft.

Question 8

When foreign direct investments are made part of a global production network such integration

Accepted Answer

When foreign direct investments are integrated into a global production network, it provides export opportunities that would otherwise be unavailable to indigenous producers. This can help increase the host country's export earnings and boost its economic growth.

Question 9

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

Accepted Answer

This statement is true. While MNCs do have a global reach, their activities are mainly concentrated in the advanced industrial countries, such as Western Europe, the United States, and Japan. These countries have large populations with high levels of purchasing power, making them attractive targets for MNCs. However, there are also many MNCs that are expanding their operations in emerging markets, such as China, India, Brazil, and Russia, due to the potential for growth and development in these regions.

Question 10

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

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Question 11

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

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Question 12

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

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Question 13

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

Accepted Answer

Vertical integration refers to a situation where a firm internalizes its transactions for intermediate goods, thereby taking over the supply chain activities that were previously handled by other firms. This enables the firm to have greater control over its production process, reduce transaction costs, and improve efficiency.

Question 14

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.

Accepted Answer

This statement is true as multinational corporations operate across national borders and often have a global reach. However, political systems are still based on national territories, which can create tensions in their relationship with MNCs.

Question 15

Positive externalities arise when

Accepted Answer

Positive externalities arise when 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. This means that there are spill-over effects that benefit the broader society. For example, the transfer of technology may lead to the development of new industries or the improvement of existing ones, which could in turn create jobs and increase economic growth.

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

This statement is true. MNCs, also known as multinational corporations, have been increasing their investments in developing countries since the late 1980s. This is due in part to the availability of lower-cost labor and natural resources in these countries, as well as the potential for market growth and expansion.

Question 18

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

Accepted Answer

Locational advantages for market-oriented investments typically arise from being close to customers or key markets, not from the presence of natural resources, which is more related to resource-seeking investments.

Question 19

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

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Question 20

Transfer pricing takes place when MNCs require the local affiliate

Accepted Answer

Transfer pricing is a strategy used by MNCs to maximize their global profits by setting prices for the goods and services exchanged between their subsidiaries located in different countries. In this regard, MNCs require the local affiliate to purchase inputs from other subsidiaries at prices set by the parent company to ensure the transfer of profits from higher tax to lower tax countries. This allows MNCs to reduce their tax liabilities in high-tax countries and increase profitability in low-tax countries.

Quiz 8: Multinational Corporations in the Global Economy