Exam 9: International Factor Movements and Multinational Enterprises

Foreign-owned companies in the United States operate under more strict antitrust, environmental, and other regulations than U.S.-owned companies.

Which of the following would $\underline { \text { best } }$ explain why foreign direct investment might be attracted to the United States?

Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel. This practice is referred to as:

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.

Figure 9.3 Figure 9.3 represents the Mexican 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 Mexican workers. The demand schedule of labor is denoted by D_Mexico. -Consider Figure 9.3. Policies that permit Honduran workers to freely migrate to Mexico would likely be resisted by:

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.

The effect of workers migrating from low-wage Mexico to high-wage United States is to redistribute income from capital to labor in the United States and from labor to capital in Mexico.

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.

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

Multinational enterprises:

Horizontal integration would occur if General Motors sets up a subsidiary in Mexico to produce automobiles identical to those that it produces in the United States.

What are the typical ways in which multinational enterprises have diversified their operations?

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. Suppose that Sony Company and American Company jointly form a new firm, Venture Company, whose ball bearings replace the output sold by the parents in the domestic market. Assuming that Venture Company operates as a monopoly and that its costs equal MC₀=AC₀, the firm's price, output, and total profit would respectively equal:

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 $\underline { \text { technological advances } }$ 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:

As workers migrate from low-wage Mexico to high-wage United States, wages tend to rise in Mexico and fall in the United States.

$\underline { \text { most } }$ U.S. direct investment abroad occurs in:

Vertical integration occurs if a parent multinational corporation establishes foreign subsidiaries to produce intermediate goods or inputs that go into the production of a finished good.

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

Multinational enterprises may provide benefits to their source (home) countries because they may:

In recent years, the $\underline { \text { largest } }$ amount of U.S. direct investment abroad has occurred in: