Question 1

________________ has been the most common form of direct foreign investments in developing countries and in some mineral-rich developed countries.

Accepted Answer

Backward vertical integration involves a company investing in and acquiring suppliers or distributors to ensure a steady supply of raw materials or components. This is the most common form of direct foreign investment in developing countries, where there may be limited local suppliers or infrastructure to support production. Additionally, this strategy is often used in mineral-rich developed countries, where companies will invest in mining operations to secure a consistent source of raw materials. Forward vertical integration (B) is when a company invests in and acquires downstream companies, such as distributors or retailers. Linear integration (C) is not a commonly used term in business strategy. Horizontal integration (D) is when a company invests in and acquires competitors in the same industry. While this strategy is common in developed countries, it is less common in developing countries due to limited competition in some markets.

Question 2

Investments in securities with yields that are inversely correlated is known as

Accepted Answer

Risk diversification refers to spreading investments across different securities or asset classes to reduce the overall risk of the portfolio. Investing in securities with yields that are inversely correlated is a common diversification strategy, as it can help to balance out losses and gains in different types of assets. Vertical and horizontal integration refer to different types of business mergers, and basic investment theory is a general concept that encompasses many different strategies and principles.

Question 3

When capital moves from lower returns to higher returns,there will be

Accepted Answer

When capital moves from lower returns to higher returns, it leads to greater efficiency in the use of capital internationally, which can result in increased world output and increased world welfare. Therefore, all of the above options are correct.

Question 4

The overpricing or underpricing of products in the intrafirm trade of multinational corporations in an attempt to shift income and profits from high to low tax nations is known as

Accepted Answer

The technique mentioned in the question is known as transfer pricing, which involves setting the price of goods or services traded between different divisions or subsidiaries of a multinational corporation. This is done to manipulate profits and shift income from high-tax countries to low-tax countries, where the corporate tax rate is relatively lower. Such transfer pricing practices are often scrutinized by tax authorities to ensure that they comply with the arm's length principle (i.e., the transfer price should be equivalent to the price that would have been charged between unrelated parties in a similar transaction). Predatory pricing, tax pricing, and out-bidding pricing are not relevant to the scenario described in the question.

Question 5

When a firm expands in the production process to supply its own raw materials and intermediate products or to provide its own sales or distribution networks,the process is called

Accepted Answer

Vertical integration involves a company expanding its production process to supply raw materials and intermediate products or to provide sales and distribution networks. Therefore, choice C is the best answer. Horizontal integration involves a company merging with or acquiring another company in the same industry or at the same stage of production. Risk diversification refers to spreading investments across multiple assets or activities to minimize risk, which is not applicable to this scenario.

Question 6

Why is a portfolio including both domestic and foreign securities likely to have a higher average yield than one only containing domestic securities?

Accepted Answer

Diversification into foreign securities can provide non-correlated returns, potentially increasing the portfolio's average yield compared to a portfolio consisting solely of domestic securities.

Question 7

____________ is the production abroad of a differentiated product that is also produced at home.

Accepted Answer

Horizontal integration refers to the expansion of a company by acquiring similar firms in the same industry. In this case, the differentiated product is already being produced by the company at home, and the company is expanding its production by producing the same product abroad. This is a form of horizontal integration. Forward integration refers to expanding towards the customer, while backward integration refers to expanding towards suppliers. Vertical integration refers to expanding throughout the supply chain, from production to final delivery. None of these definitions fit the scenario described.

Question 8

When a multinational corporation controls the raw material used in the production of its final good through a vertical integration,which of the following is most likely to happen?

Accepted Answer

By controlling the raw materials through vertical integration, the multinational corporation can ensure an uninterrupted supply of the raw material at a lower cost. This can lead to lower production costs and increased profits for the company. Lower production costs do not necessarily mean lower prices for consumers, as pricing decisions are influenced by a variety of factors such as market competition, demand, and production costs. The MNC may face anti-trust charges if it engages in anti-competitive practices, but vertical integration itself is not necessarily a violation of anti-trust laws.

Question 9

The United States is the main supplier of foreign direct investments to what countries?

Accepted Answer

According to recent data from the Bureau of Economic Analysis, the top recipients of foreign direct investment from the United States in 2019 were Latin America, Bangladesh, Pakistan, the Philippines, and Saudi Arabia.

Question 10

If capital (K)is free to move internationally,then K will flow from the nation with ___________,to the nation with ______________ until the returns have equalized between countries.

Accepted Answer

Capital tends to move from areas with lower returns on capital to those with higher returns, seeking to maximize profits, until the returns on capital equalize between the two areas.

Question 11

Which of the following is not a problem created in the home country in association with multinational corporations who are engaged in foreign direct investment?

Accepted Answer

Loss of high skill technical jobs and reduced return to capital is not a problem created in the home country in association with multinational corporations who are engaged in foreign direct investment.

Question 12

______________________ can explain two-way international portfolio investments.

Accepted Answer

Portfolio theory and risk diversification explain the concept of two-way international portfolio investments. This theory proposes that by diversifying investments in different markets, investors can reduce the overall risk of their portfolio. In two-way international portfolio investments, investors from different countries invest in each other's markets in order to diversify their portfolio and reduce risk. This allows investors to access new markets, and potentially higher returns, while reducing their overall portfolio risk.

Question 13

Which of the following is not a primary reason for a country to go for foreign direct investment?

Accepted Answer

While a safe and secure return on investment is a desirable outcome, it is not the primary reason for a country to go for foreign direct investment. The other options listed - preserving unique production knowledge or managerial skill, obtaining control of a key raw material, and bypassing tariff and other restrictions on imports - are more common reasons for FDI.

Question 14

IBM does not want to license foreign producers because it wants to retain complete control over its ____________ and to ensure consistence in _____________.

Accepted Answer

IBM wants to retain complete control over its trade secrets and patents, which are crucial to its competitive advantage in the market. By licensing foreign producers, IBM would risk losing control over its proprietary technology and business processes. Additionally, IBM wants to ensure consistency in quality and services by controlling the production process in-house rather than relying on external producers.

Question 15

_______________ involves multinational corporations establishing subsidiaries for the sale or distribution of their final goods abroad.

Accepted Answer

Forward vertical integration involves a company expanding its operations in the direction of its distribution channel. In this case, the multinational corporation establishes subsidiaries to sell its final goods in foreign markets. This allows the company to have greater control over its distribution and ensures that its products are reaching their intended markets.

Question 16

Direct foreign investments have been greatly facilitated by the rapid advancements in _______________ since the end of World War II.

Accepted Answer

The advancements in transportation and communication since the end of World War II have greatly facilitated direct foreign investments. Improved transportation infrastructure and faster modes of communication have greatly reduced the costs and time involved in conducting business across national borders, making it easier for foreign investors to establish their presence in new markets.

Question 17

If less than full employment is present,then foreign investments tend to ________ the level of employment in the investing country and __________ foreign investments in the host country.

Accepted Answer

Foreign investments tend to decrease the level of employment in the investing country because they shift production to the host country, where labor costs are lower. This leads to an increase in foreign investments in the host country, as companies seek to take advantage of the lower labor costs.

Question 18

It has been found that firms with a strong international orientation tend to

Accepted Answer

Firms with a strong international orientation tend to have more opportunities for growth and expansion, access to larger markets, and the ability to capitalize on economies of scale. This can lead to increased profitability compared to purely domestic firms.

Question 19

In the year in which foreign investment takes place,an investing country will see one of the following to occur?

Accepted Answer

When a country invests abroad, it means that it is sending money out of the country to purchase assets in another country. This action increases the country's foreign expenditures because it is spending money internationally. As a result, there is an outflow of capital from the investing country, which can lead to a balance-of-payment deficit, at least in the short term, because more money is leaving the country than is coming in.

Question 20

Today,multinational corporations account for what percent of the world's output?

Accepted Answer

Multinational corporations account for approximately 25% of the world's output, reflecting their significant role in the global economy.

Quiz 9: International Resource Movements and Multinational Corporations

________________ has been the most common form of direct foreign investments in developing countries and in some mineral-rich developed countries.

Investments in securities with yields that are inversely correlated is known as

When capital moves from lower returns to higher returns,there will be

The overpricing or underpricing of products in the intrafirm trade of multinational corporations in an attempt to shift income and profits from high to low tax nations is known as

When a firm expands in the production process to supply its own raw materials and intermediate products or to provide its own sales or distribution networks,the process is called

Why is a portfolio including both domestic and foreign securities likely to have a higher average yield than one only containing domestic securities?

____________ is the production abroad of a differentiated product that is also produced at home.

When a multinational corporation controls the raw material used in the production of its final good through a vertical integration,which of the following is most likely to happen?

The United States is the main supplier of foreign direct investments to what countries?

If capital (K) is free to move internationally,then K will flow from the nation with _,to the nation with ____ until the returns have equalized between countries.

Which of the following is not a problem created in the home country in association with multinational corporations who are engaged in foreign direct investment?

______________________ can explain two-way international portfolio investments.

Which of the following is not a primary reason for a country to go for foreign direct investment?

IBM does not want to license foreign producers because it wants to retain complete control over its and to ensure consistence in _.

_______________ involves multinational corporations establishing subsidiaries for the sale or distribution of their final goods abroad.

Direct foreign investments have been greatly facilitated by the rapid advancements in _______________ since the end of World War II.

If less than full employment is present,then foreign investments tend to the level of employment in the investing country and __ foreign investments in the host country.

It has been found that firms with a strong international orientation tend to

In the year in which foreign investment takes place,an investing country will see one of the following to occur?

Today,multinational corporations account for what percent of the world's output?

Quiz 9: International Resource Movements and Multinational Corporations

________________ has been the most common form of direct foreign investments in developing countries and in some mineral-rich developed countries.

Investments in securities with yields that are inversely correlated is known as

When capital moves from lower returns to higher returns,there will be

The overpricing or underpricing of products in the intrafirm trade of multinational corporations in an attempt to shift income and profits from high to low tax nations is known as

When a firm expands in the production process to supply its own raw materials and intermediate products or to provide its own sales or distribution networks,the process is called

Why is a portfolio including both domestic and foreign securities likely to have a higher average yield than one only containing domestic securities?

____________ is the production abroad of a differentiated product that is also produced at home.

When a multinational corporation controls the raw material used in the production of its final good through a vertical integration,which of the following is most likely to happen?

The United States is the main supplier of foreign direct investments to what countries?

If capital (K) is free to move internationally,then K will flow from the nation with ___________,to the nation with ______________ until the returns have equalized between countries.

Which of the following is not a problem created in the home country in association with multinational corporations who are engaged in foreign direct investment?

______________________ can explain two-way international portfolio investments.

Which of the following is not a primary reason for a country to go for foreign direct investment?

IBM does not want to license foreign producers because it wants to retain complete control over its ____________ and to ensure consistence in _____________.

_______________ involves multinational corporations establishing subsidiaries for the sale or distribution of their final goods abroad.

Direct foreign investments have been greatly facilitated by the rapid advancements in _______________ since the end of World War II.

If less than full employment is present,then foreign investments tend to ________ the level of employment in the investing country and __________ foreign investments in the host country.

It has been found that firms with a strong international orientation tend to

In the year in which foreign investment takes place,an investing country will see one of the following to occur?

Today,multinational corporations account for what percent of the world's output?

If capital (K) is free to move internationally,then K will flow from the nation with _,to the nation with ____ until the returns have equalized between countries.

IBM does not want to license foreign producers because it wants to retain complete control over its and to ensure consistence in _.

If less than full employment is present,then foreign investments tend to the level of employment in the investing country and __ foreign investments in the host country.