An advantage of foreign direct investment versus domestic investment for businesses can be:
A)to cut costs of production.
B)to reduce overall risk relative to financial investments available at home.
C)to increase profit without having to pay taxes on the earnings.
D)None of these is an advantage of FDI.

Question

Quizplus · Accepted Answer

One advantage of foreign direct investment is that it can help businesses cut costs of production by accessing cheaper labor, raw materials, or operating in countries with lower tax rates or regulatory costs. This can lead to improved profitability and competitiveness.

Answer: B 
 Foreign direct investment can help businesses reduce overall risk relative to financial investments available at home, by diversifying their operations and sales across different markets and countries. This can help mitigate risks associated with economic or political instability in any one market or country.

Answer: C 
 This statement is incorrect. Businesses are required to pay taxes on earnings generated through foreign direct investment, just as they would with domestic investment.

Answer: D 
 None of these is a complete or accurate answer as A and B provide advantages of foreign direct investment, while C is incorrect.

An Advantage of Foreign Direct Investment Versus Domestic Investment for Businesses