Exam 9: International Factor Movements and Multinational Enterprises

There is virtually universal agreement among economists that foreign direct investment in the United States has reduced the economic welfare of the average U.S. citizen.

Foreign direct investment typically occurs when

American labor unions accuse U.S. multinational firms of all of the following $\underline { \text { except } }$ that such firms

Which of the following is $\underline { \text { not } }$ a significant motive for the formation of multinational enterprises?

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

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

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:

"Risk spreading" is a motive most likely to be served when firms undergo:

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

Most vertical foreign investment, as implemented by multinational corporations, is "forward" in nature rather than "backward."

Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods?

Trade analysis involving multinational enterprises $\underline { \text { differs } }$ from our conventional trade analysis in that multinational enterprise analysis emphasizes:

What are Mexican maquiladoras?

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. If Honduran migration to Mexico results in the labor force increasing to 12 workers, denoted by schedule S₁, the:

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, at labor market equilibrium with supply S₀, _____ workers are hired at a wage rate of $____ per hour, while total wages equal ____.

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.

In the United States, labor unions have generally resisted efforts to implement restrictions on the number of foreigners allowed into the country.

Forward vertical integration would occur if a U.S. automobile manufacturer acquired a German subsidiary.

International joint ventures can lead to welfare losses when the newly established firm:

Foreign direct investment would occur if Microsoft Inc. of the United States purchased securities of the French government.