Exam 9: International Factor Movements and Multinational Enterprises

A joint venture leads to increases in national welfare if its cost-reduction effect is due to productivity gains and if it more than offsets the market-power effect.

Suppose that General Motors per unit costs for a Mexican subsidiary are $17,000 per truck for 10,000 trucks, and $17,500 per truck for 12,000 trucks.A local Mexican firm can produce the same amounts at $16,500 and $18,000.These trucks can also be produced in Michigan and exported to Mexico at a constant cost of $18,500 per truck.If Mexican demand for trucks is 10,000 trucks, General Motor's lowest cost option is to

24.Multinational enterprises face problems since they

American labor unions maintain that U.S.multinational enterprises

Which term best describes the Iran Oil Investment Co.?

By establishing transplant factories in the United States, Japanese automakers were able to avoid export restrictions imposed by the Japanese government, but not import restrictions imposed by the U.S.government.

Due to transfer-pricing problems, multinational corporations must shift profits away from countries with low corporate tax rates to high tax-rate countries, thus absorbing a larger tax bite.

Imagine that a U.S.firm issues a press release regarding its intentions to acquire a foreign firm, a competitor.This competitor is located in a country with cheaper raw materials, more productive labor, and lower corporate tax rates.Which of the following factors is consistent with a demand motive for foreign direct investment?

Once a firm knows that foreign demand exists, its next step is to

Joint ventures lead to losses in national welfare when the newly established business adds to preexisting production capacity and fosters additional competition.

The "brain drain" is

Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles.This practice is referred to as

A U.S.firm is deciding on whether or not to build a production facility in Uruguay.All else equal, if Uruguay has a relatively high inflation rate, it therefore has relatively high

Figure 9.2 represents the U.S. labor market. Assume that labor and capital are the only factors of production. Also assume the initial supply schedule of labor is denoted by S0 and consists entirely of native U.S. workers. The demand schedule of labor is denoted by D0. ? ? -Consider Figure 9.2.At labor market equilibrium, income earned by U.S.capital owners equals

International trade in goods and services and flows of productive factors are substitutes for each other.

Multinational corporations often locate manufacturing operations abroad in order to take advantage of foreign resource endowments or wage scales.

The theory of multinational enterprise is totally inconsistent with the principle of comparative advantage.

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀. Figure 9.1. International Joint Venture -Consider Figure 9.1.With SKF and Timken behaving as competitors, the equilibrium price and output respectively equal

Trade analysis involving multinational enterprises is in agreement with conventional trade analysis in that both emphasize

Which of the following are the economic forces underlying the international flow of goods and services?