Exam 9: International Factor Movements and Multinational Enterprises

Which of the following best refers to the outright construction or purchase abroad of productive facilities,such as manufacturing plants,by domestic residents?

In the short run,the home country of an MNE will likely experience an employment decline when production is shifted overseas.

Concerning the decision of a U.S.resident to lend or invest abroad,Zimbabwe and Somalia have recently been considered to be relatively safe investments regarding the risk of default.

The migration of workers from Mexico to the United States tends to exert downward pressure on the wages of native U.S.workers that compete against Mexican workers for jobs.

Critics of U.S.trade and immigration policy maintain that

Direct foreign investment has taken all of the following forms except:

Are there any differences between the theory of multinational enterprises and conventional trade theory?

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. Figure 9.2.U.S.Labor Market -Consider Figure 9.2.Policies that permit Mexican workers to freely migrate to the United States would likely be resisted by:

______ tends to benefit from increased immigration

What are guest workers?

Developing countries have sometimes feared open immigration policies of developed countries on the grounds that highly educated and skilled people may emigrate to the developed countries,thus limiting the growth potential of the developing countries.

Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000.This practice is best referred to as:

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. Figure 9.2.U.S.Labor Market -Consider Figure 9.2.At labor market equilibrium,the payment to U.S.capital owners equals:

American critics of U.S.multinational enterprises contend that they promote

Labor migration tends to increase output and decrease wages in the country of immigration while decreasing output and increasing wages in the country of emigration.

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

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

A joint venture along two large competing companies tends to yield a market-power effect,which results in a reduction in consumer surplus,that is not offset by a corresponding gain to producers.

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.

Multinational corporations sometimes locate manufacturing subsidiaries abroad to avoid tariff barriers which would place their products at a competitive disadvantage in a foreign country.