Question 1

FDI can take the form of

Accepted Answer

A) Greenfield investment. 
B) cross-border M &A. 
C) establishing new production facilities in a foreign country. 
D) all of the options 
A) Greenfield investment. 
B) cross-border M &A. 
C) establishing new production facilities in a foreign country. 
D) all of the options

Question 2

Unlike the theory of international trade or the theory of international portfolio investment,

Accepted Answer

A) we do not have a well-developed,comprehensive theory of FDI. 
B) the comprehensive theory of FDI focuses on mean-variance efficiency. 
C) the comprehensive theory of FDI is an arbitrage argument,like interest rate parity. 
D) none of the options 
A) we do not have a well-developed,comprehensive theory of FDI. 
B) the comprehensive theory of FDI focuses on mean-variance efficiency. 
C) the comprehensive theory of FDI is an arbitrage argument,like interest rate parity. 
D) none of the options

Question 3

Which of the following statements is true about product life cycle theory?

Accepted Answer

A) In the early stages of the product life cycle,the demand for the new product is relatively insensitive to the price and thus a pioneering firm can charge a relatively high price. 
B) It predicts that over time the U.S.switches from an exporting country of new products to an importing country. 
C) It has an "S"-shaped curve when plotting "quantity sold" versus "time." 
D) all of the options 
A) In the early stages of the product life cycle,the demand for the new product is relatively insensitive to the price and thus a pioneering firm can charge a relatively high price. 
B) It predicts that over time the U.S.switches from an exporting country of new products to an importing country. 
C) It has an "S"-shaped curve when plotting "quantity sold" versus "time." 
D) all of the options

Question 4

Prior to Honda's decision to build a plant in Ohio,

Accepted Answer

A) the Japanese government had been urging the automobile companies to begin production in the United States. 
B) the Japanese government had been urging the automobile companies to keep production in Japan. 
C) the Japanese government imposed import quotas on U.S.-made automobiles. 
D) none of the options 
A) the Japanese government had been urging the automobile companies to begin production in the United States. 
B) the Japanese government had been urging the automobile companies to keep production in Japan. 
C) the Japanese government imposed import quotas on U.S.-made automobiles. 
D) none of the options

Question 5

The boomerang effect is defined as

Accepted Answer

A) the possibility that if the secret formula of Coca-Cola were leaked,that other firms would come up with similar products and hurt Coca-Cola's sales. 
B) the possibility that FDI in an undeveloped nation will lead to a group of workers who have enough money to afford the firm's products,leading to an increase of sales and increase of workers and so on. 
C) the possibility that FDI in an undeveloped nation will lead to a group of domestic workers no longer have enough money to afford the firm's products,leading to an decrease of sales. 
D) none of the options 
A) the possibility that if the secret formula of Coca-Cola were leaked,that other firms would come up with similar products and hurt Coca-Cola's sales. 
B) the possibility that FDI in an undeveloped nation will lead to a group of workers who have enough money to afford the firm's products,leading to an increase of sales and increase of workers and so on. 
C) the possibility that FDI in an undeveloped nation will lead to a group of domestic workers no longer have enough money to afford the firm's products,leading to an decrease of sales. 
D) none of the options

Question 6

In a study of the effect of international acquisitions on the stock prices of U.S.firms,U.S.acquiring firms with information-based intangible assets experience a significantly positive stock price reaction upon foreign acquisition.

Accepted Answer

A) This is consistent with the finding that the market value of the firm is positively related to its multinationality because of the firm's intangible assets,such as R&D capabilities,with public good nature. 
B) It is not the multinationality per se that contributes to the firm's value. 
C) Their empirical findings support the (forward-)internalization theory of FDI. 
D) all of the options 
A) This is consistent with the finding that the market value of the firm is positively related to its multinationality because of the firm's intangible assets,such as R&D capabilities,with public good nature. 
B) It is not the multinationality per se that contributes to the firm's value. 
C) Their empirical findings support the (forward-)internalization theory of FDI. 
D) all of the options

Question 7

Transfer risk refers to the risk which arises from the uncertainty about

Accepted Answer

A) the host's country's policies affecting the local operations of an MNC. 
B) the host's country's policy regarding ownership and control of local operations. 
C) cross-border flows of capital,payment,know-how,and the like. 
D) none of the options 
A) the host's country's policies affecting the local operations of an MNC. 
B) the host's country's policy regarding ownership and control of local operations. 
C) cross-border flows of capital,payment,know-how,and the like. 
D) none of the options

Question 8

As a mode of entry into a foreign market,cross-border acquisition

Accepted Answer

A) involves building new production facilities in a foreign country. 
B) offer faster speed over greenfield investment. 
C) can offer access to proprietary assets. 
D) offer faster speed over greenfield investment,and can also offer access to proprietary assets. 
A) involves building new production facilities in a foreign country. 
B) offer faster speed over greenfield investment. 
C) can offer access to proprietary assets. 
D) offer faster speed over greenfield investment,and can also offer access to proprietary assets.

Question 9

In the 1960s,Coca-Cola,which had bottling plants in India,faced strong pressure from the Indian government to reveal the Coke formula as a condition for continued operations in India.As a result,

Accepted Answer

A) Coke agreed to reveal the formula to the Indian government,which has maintained it as a state secret to this day. 
B) instead of revealing the formula,Coke withdrew from the Indian market. 
C) Coke was able to successfully lobby the government to withdraw this demand. 
D) none of the options 
A) Coke agreed to reveal the formula to the Indian government,which has maintained it as a state secret to this day. 
B) instead of revealing the formula,Coke withdrew from the Indian market. 
C) Coke was able to successfully lobby the government to withdraw this demand. 
D) none of the options

Question 10

Severe imperfections in the labor market lead to persistent wage differentials among countries

Accepted Answer

A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
C) but these differences are offset by low productivity in low labor cost countries. 
D) because workers are not allowed to freely move across national boundaries to seek higher wages,and because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
C) but these differences are offset by low productivity in low labor cost countries. 
D) because workers are not allowed to freely move across national boundaries to seek higher wages,and because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences.

Question 11

MNCs may undertake overseas investment projects in a foreign country,despite the fact that local firms may enjoy inherent advantages.This implies that

Accepted Answer

A) MNCs are making a mistake in this case and will have to eventually withdraw. 
B) MNCs should have significant advantages over local firms such as comparative advantages due to intangible assets. 
C) the local firms will not have to compete due to their inherent advantages over the foreigners. 
D) none of the options 
A) MNCs are making a mistake in this case and will have to eventually withdraw. 
B) MNCs should have significant advantages over local firms such as comparative advantages due to intangible assets. 
C) the local firms will not have to compete due to their inherent advantages over the foreigners. 
D) none of the options

Question 12

According to Raymond Vernon (1966),

Accepted Answer

A) U.S.firms undertake FDI at a particular stage in the life cycle of the products that they initially introduced. 
B) the majority of new products,such as computers,televisions,and mass-produced cars,were developed by U.S.firms and first marketed in the United States. 
C) in the early stage of the product life cycle,the demand for the new product is relatively insensitive to the price and thus the pioneering firm can charge a relatively high price. 
D) all of the options 
A) U.S.firms undertake FDI at a particular stage in the life cycle of the products that they initially introduced. 
B) the majority of new products,such as computers,televisions,and mass-produced cars,were developed by U.S.firms and first marketed in the United States. 
C) in the early stage of the product life cycle,the demand for the new product is relatively insensitive to the price and thus the pioneering firm can charge a relatively high price. 
D) all of the options

Question 13

The dominant source of FDI outflows is

Accepted Answer

A) several developed countries. 
B) a few underdeveloped countries next to wealthy neighbors,like Mexico. 
C) Africa and China. 
D) none of the options 
A) several developed countries. 
B) a few underdeveloped countries next to wealthy neighbors,like Mexico. 
C) Africa and China. 
D) none of the options

Question 14

In evaluating political risk,experts focus their attention on a set of key factors such as

Accepted Answer

A) the host country's political/government system. 
B) historical records of political parties and their relative strengths. 
C) integration of the host country into the world political/economic system. 
D) all of the options 
A) the host country's political/government system. 
B) historical records of political parties and their relative strengths. 
C) integration of the host country into the world political/economic system. 
D) all of the options

Question 15

FDI stocks

Accepted Answer

A) are the common shares of multinational companies that invest abroad. 
B) are mutual funds that invest in FDI. 
C) represent the accumulation of previous years' FDI flows. 
D) are the sum total of current year FDI flows. 
A) are the common shares of multinational companies that invest abroad. 
B) are mutual funds that invest in FDI. 
C) represent the accumulation of previous years' FDI flows. 
D) are the sum total of current year FDI flows.

Question 16

Why do governments regulate international trade?

Accepted Answer

A) To raise revenue 
B) Protect domestic industries 
C) Pursue other economic objectives 
D) all of the options 
A) To raise revenue 
B) Protect domestic industries 
C) Pursue other economic objectives 
D) all of the options

Question 17

The product life-cycle theory predicts that

Accepted Answer

A) over time the United States switches from an exporting country of new products to an importing country. 
B) over time the United States switches from a comparative advantage in R&D to a service economy. 
C) over time the United States education system maintains the country's dominant position in the world economy. 
D) none of the options 
A) over time the United States switches from an exporting country of new products to an importing country. 
B) over time the United States switches from a comparative advantage in R&D to a service economy. 
C) over time the United States education system maintains the country's dominant position in the world economy. 
D) none of the options

Question 18

Some of the risks that a U.S.-based MNC can encounter in its foreign investments are (i)an increase in the cost of borrowing due to a rise in interest rates.
(ii)increase in inflation rates.
(iii)dumping.
(iv)unfair competition by local companies.
(v)inconvertibility of foreign currencies.
(vi)expropriation.
(vii)destruction of properties due to war,revolution,and other violent political events in foreign countries.
(viii)loss of business income due to political violence.

Accepted Answer

A) (i),(ii),(iii),and (iv) 
B) (v),(vi),(vii),and (viii) 
C) (i),(ii),(iii),(iv),(v),(vi),(vii),and (viii) 
D) none of the options 
A) (i),(ii),(iii),and (iv) 
B) (v),(vi),(vii),and (viii) 
C) (i),(ii),(iii),(iv),(v),(vi),(vii),and (viii) 
D) none of the options

Question 19

A "greenfield" investment

Accepted Answer

A) involves soybeans in the spring,corn in the summer. 
B) is generally less politically sensitive than the acquisition of an existing foreign firm. 
C) is generally more politically sensitive than the acquisition of an existing foreign firm. 
D) none of the options 
A) involves soybeans in the spring,corn in the summer. 
B) is generally less politically sensitive than the acquisition of an existing foreign firm. 
C) is generally more politically sensitive than the acquisition of an existing foreign firm. 
D) none of the options

Question 20

OPIC is the

Accepted Answer

A) Overseas Pirate Investment Corporation. 
B) Overseas Private Investment Corporation. 
C) Organization Petroleum Importing Countries. 
D) none of the options 
A) Overseas Pirate Investment Corporation. 
B) Overseas Private Investment Corporation. 
C) Organization Petroleum Importing Countries. 
D) none of the options

FDI can take the form of

Unlike the theory of international trade or the theory of international portfolio investment,

Which of the following statements is true about product life cycle theory?

Prior to Honda's decision to build a plant in Ohio,

The boomerang effect is defined as

In a study of the effect of international acquisitions on the stock prices of U.S.firms,U.S.acquiring firms with information-based intangible assets experience a significantly positive stock price reaction upon foreign acquisition.

Transfer risk refers to the risk which arises from the uncertainty about

As a mode of entry into a foreign market,cross-border acquisition

In the 1960s,Coca-Cola,which had bottling plants in India,faced strong pressure from the Indian government to reveal the Coke formula as a condition for continued operations in India.As a result,

Severe imperfections in the labor market lead to persistent wage differentials among countries

MNCs may undertake overseas investment projects in a foreign country,despite the fact that local firms may enjoy inherent advantages.This implies that

According to Raymond Vernon (1966),

The dominant source of FDI outflows is

In evaluating political risk,experts focus their attention on a set of key factors such as

FDI stocks

Why do governments regulate international trade?

The product life-cycle theory predicts that

A "greenfield" investment

OPIC is the

International Monetary System

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

FDI can take the form of

Unlike the theory of international trade or the theory of international portfolio investment,

Which of the following statements is true about product life cycle theory?

Prior to Honda's decision to build a plant in Ohio,

The boomerang effect is defined as

In a study of the effect of international acquisitions on the stock prices of U.S.firms,U.S.acquiring firms with information-based intangible assets experience a significantly positive stock price reaction upon foreign acquisition.

Transfer risk refers to the risk which arises from the uncertainty about

As a mode of entry into a foreign market,cross-border acquisition

In the 1960s,Coca-Cola,which had bottling plants in India,faced strong pressure from the Indian government to reveal the Coke formula as a condition for continued operations in India.As a result,

Severe imperfections in the labor market lead to persistent wage differentials among countries

MNCs may undertake overseas investment projects in a foreign country,despite the fact that local firms may enjoy inherent advantages.This implies that

According to Raymond Vernon (1966),

The dominant source of FDI outflows is

In evaluating political risk,experts focus their attention on a set of key factors such as

FDI stocks

Why do governments regulate international trade?

The product life-cycle theory predicts that

A "greenfield" investment

OPIC is the

International Monetary System

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters