Question Bank International Business Essay

5108 Words Sep 2nd, 2013 21 Pages
Chapter 07
Foreign Direct Investment

True / False Questions

1. (p. 242) A firm becomes a multinational enterprise when it undertakes foreign direct investment.
TRUE
2. (p. 242) Licensing involves the establishment of a new operation in a foreign country.
FALSE

3. (p. 242) If a firm that makes bicycles in Germany acquires a French bicycle producer, Greenfield investment has taken place.
FALSE
4. (p. 242) The amount of FDI undertaken over a given time period is known as the flow of FDI.
TRUE

5. (p. 242) The total accumulated value of foreign-owned assets at a given time is the inflow of FDI.
FALSE

6. (p. 242) FDI is seen by executives as a means of circumventing future trade barriers.
TRUE

7.
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(p. 259) A current account deficit exists when a country imports more than it exports.
TRUE

31. (p. 259) In recent years, the U.S. has run a persistent balance of payments surplus.
FALSE

32. (p. 260) Host governments sometimes worry that the subsidiaries of foreign MNEs may have greater economic power than indigenous competitors.
TRUE

33. (p. 261) FDI does not benefit the host country's balance of payments if the foreign subsidiary creates demand for home-country exports of capital equipment, intermediate goods or complementary products.
FALSE
34. (p. 262) The term offshore production refers to FDI undertaken to serve the home market.
TRUE
35. (p. 263) Countries cannot prohibit national firms from investing in certain countries for political reasons.
FALSE

36. (p. 264) The two most common methods of restricting inward FDI are ownership restraints and performance requirements.
TRUE

37. (p. 265) The WTO has been very successful in efforts to initiate talks aimed at establishing a universal set of rules designed to promote the liberalization of FDI.
FALSE

38. (p. 266) Licensing is a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.
FALSE

39. (p. 266-267) Typically licensing will be a common strategy in oligopolies where competitive interdependence requires that multinational firms maintain tight control over foreign operations so that they

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