Exam 7: Foreign Direct Investment

Scenario: Global Manufacturing, Inc. (GMI) GMI is a fast-growing U.S. company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B. -GMI's investments are considered ________.

The benefit of ________ is greater profit because the firm is far better able to dictate the cost of its inputs and/or the price of its output.

A(n) ________ is the advantage that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.

A(n) ________ is the advantage that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.

The ________ theory states that firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for an investment.

Tax incentives and infrastructure improvements are financial incentives used by home countries to encourage outflows of foreign direct investment.

The purchase of physical assets or a significant amount of ownership (stock) of a company in another country to gain a measure of management control is called ________.

The ________ theory states that a company will begin by exporting its product and later undertake foreign direct investment as a product moves through its life cycle.

In the ________ stage of the international product life cycle, a good is produced in the home country because of uncertain domestic demand and to keep production close to the research department that developed the product.

If a U.S. citizen invests in the Brazilian stock market, the transaction would show up on the capital accounts of both the United States and Brazil.

In the ________ product stage of the international product life cycle theory, increased competition pressures a company to produce in low-cost developing nations.

The international product life cycle theory is a powerful tool in understanding why firms choose foreign direct investment over other forms of market entry.

According to the international product life cycle, in which stage of a product's life does a company directly invest in production facilities in countries where demand is great enough to warrant production facilities?

The international product life cycle theory says that in the standardized product stage, a good is produced in the home country where it was developed because of uncertain domestic demand.

Which of the following is a national account that records transactions involving the purchase or sale of assets?

All of the following factors of production are internationally mobile EXCEPT ________.

Benefits of investment by multinationals include increased unemployment, increased tax revenues, workforce training, and the transfer of technology.

Any nation's balance of payments consists of two major components: the current account and the past-due account.

The automobile industry uses a ________ method of production.

All of the following are part of the current account EXCEPT ________.