Exam 9: International Factor Movements and Multinational Enterprises

Multinational enterprises:

An effort to diversify into nonrelated markets is most likely to be undertaken when firms undergo:

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.

Exxon Oil Co.would undertake forward vertical integration if its retailing division acquired oil wells in the Middle East.

Joint ventures lead to national welfare gains if the newly established business yields productivity increases that would have been unavailable if each parent performed the same function separately.

Which of the following would best explain why foreign direct investment might be attracted to the United States?

International joint ventures tend to yield a welfare increasing market-power effect and a welfare decreasing cost-reduction effect.

Most foreign direct investment in the United States occurs in:

Most Japanese auto assembly plants located in the United States are located in southern states such as Texas,Alabama,and Tennessee.

The largest amount of foreign direct investment in the United States has recently come from

In recent years,the world's largest corporations have included

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

Most multinational corporations have a low ratio of foreign sales to total sales,usually 5 percent or less.

Which of the following refers to the price charged for products sold to a subsidiary of a multinational enterprise by another subsidiary in another nation?

The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions.Which type of cost reduction would not lead to offsetting welfare gains for the overall economy?

____ refers to highly educated and skilled people who migrate from poor developing countries to wealthy industrial countries.

Mergers differ from joint ventures in that they involve the creation of a new business firm,rather than the union of two existing companies.

Which business device involves the creation of a new business by two or more companies,often for a limited period of time?

Figure 9.1 illustrates the market conditions facing Sony Company and American Company 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.Assume Venture Company's formation yields new cost reductions,indicated by MC1=AC1,which result from technological advances.Realizing that Venture Company results in a deadweight loss of consumer surplus,the net effect of Venture Company's formation on the welfare of the domestic economy is:

Trade analysis involving multinational enterprises differs from our conventional trade analysis in that multinational enterprise analysis emphasizes: