The ________ theory states that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection.
A) market power
B) perfect market
C) international product life cycle
D) market imperfections (internalization)

Question

Quizplus · Accepted Answer

The theory described in the question pertains to market imperfections or internalization theory, as stated in option D. Option A refers to a situation where a company has power over the market, while option B describes an ideal scenario that rarely exists in reality. Option C refers to a theory that explains the evolution of a product over its life cycle, which is not relevant to the question.

The ________ Theory States That When an Imperfection in the Market