Question 1

In a push to serve the North American market Samsung, a Korean firm, chose to locate production facilities in Mexico, mainly because

Accepted Answer

A) of lower labor costs in Mexico. 
B) to circumvent trade barriers imposed by NAFTA. 
C) because of colder weather in Canada. 
D) none of the above 
A) of lower labor costs in Mexico. 
B) to circumvent trade barriers imposed by NAFTA. 
C) because of colder weather in Canada. 
D) none of the above

Question 2

Following Honda's FDI in the U.S.,

Accepted Answer

A) the U.S. government imposed a Voluntary Trade Agreement under which Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. 
B) Toyota and Nissan made direct investments in America. 
C) sales of Hondas declined. 
D) none of the above 
A) the U.S. government imposed a Voluntary Trade Agreement under which Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. 
B) Toyota and Nissan made direct investments in America. 
C) sales of Hondas declined. 
D) none of the above

Question 3

Cross-border acquisitions are generally found to be synergy-generating corporate activities.

Accepted Answer

A) True 
 B)False

Question 4

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 above 
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 above

Question 5

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) both b and c 
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) both b and c

Question 6

Political risk refers to:

Accepted Answer

A) the potential losses to the parent firm of an MNC resulting from adverse political developments in the host country. 
B) macroeconomic risks. 
C) microeconomic risks. 
D) bankruptcy or high inflation rates. 
A) the potential losses to the parent firm of an MNC resulting from adverse political developments in the host country. 
B) macroeconomic risks. 
C) microeconomic risks. 
D) bankruptcy or high inflation rates.

Question 7

In 1992, the Enron Development Corporation, a subsidiary of the Houston-based energy company, signed a contract to build the largest-ever power plant in India, requiring a total investment of $2.8 billion. After Enron had spent nearly $300 million, the project was canceled by Hindu nationalist politicians in the Maharashtra state where the plant was to be built. Which of the following are true?

Accepted Answer

A) Subsequently, Maharashtra invited Enron to renegotiate its contract. 
B) The lack of an effective means of enforcing contracts in a foreign country is clearly a major source of political risk associated with FDI. 
C) In an effort to pressure Maharashtra to reverse its decision, Enron "pushed like hell" the U.S. Energy Department to make a statement in June 1995 to the effect that canceling the Enron deal could adversely affect other power projects. The statement only compounded the situation. The BJP politicians immediately criticized the statement as an attempt by Washington to bully India. 
D) All of the above 
A) Subsequently, Maharashtra invited Enron to renegotiate its contract. 
B) The lack of an effective means of enforcing contracts in a foreign country is clearly a major source of political risk associated with FDI. 
C) In an effort to pressure Maharashtra to reverse its decision, Enron "pushed like hell" the U.S. Energy Department to make a statement in June 1995 to the effect that canceling the Enron deal could adversely affect other power projects. The statement only compounded the situation. The BJP politicians immediately criticized the statement as an attempt by Washington to bully India. 
D) All of the above

Question 8

U.S. car makers were forced to build their own network of dealerships to enter the Japanese market.

Accepted Answer

A) This is an example of backward vertical integration. 
B) This is an example of forward vertical integration. 
C) This is an example of sideways vertical integration. 
D) None of the above 
A) This is an example of backward vertical integration. 
B) This is an example of forward vertical integration. 
C) This is an example of sideways vertical integration. 
D) None of the above

Question 9

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 above 
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 above

Question 10

The United States is the largest initiator, of FDI. The largest recipient of FDI is

Accepted Answer

A) also the United States. 
B) France. 
C) Germany. 
D) China. 
E) none of the above 
A) also the United States. 
B) France. 
C) Germany. 
D) China. 
E) none of the above

Question 11

Honda's decision to build a plant in Ohio

Accepted Answer

A) was welcomed by the United Auto Workers. 
B) was encouraged by assistance from the state of Ohio, including improved infrastructure around the plant and abatement of property taxes. 
C) involved setting up a special foreign trade zone that allowed Honda to import auto parts from Japan at a reduced tariff rate. 
D) all of the above 
A) was welcomed by the United Auto Workers. 
B) was encouraged by assistance from the state of Ohio, including improved infrastructure around the plant and abatement of property taxes. 
C) involved setting up a special foreign trade zone that allowed Honda to import auto parts from Japan at a reduced tariff rate. 
D) all of the above

Question 12

Labor services in a country can be severely underpriced relative to its productivity

Accepted Answer

A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because among all factor markets, the labor market is the most imperfect. 
C) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
D) all of the above 
A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because among all factor markets, the labor market is the most imperfect. 
C) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
D) all of the above

Question 13

Trade barriers can arise naturally. Which of the following are natural barriers to trade?

Accepted Answer

A) Transportation costs 
B) Quotas 
C) Tariffs 
D) Transactions costs 
A) Transportation costs 
B) Quotas 
C) Tariffs 
D) Transactions costs

Question 14

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 above 
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 above

Question 15

Japan plays a major role as an exporter of FDI. As a recipient of FDI,

Accepted Answer

A) Japan receives as much FDI as it exports, making it a major player on both fronts. 
B) Japan plays a relatively minor role, reflecting a variety of legal, economic, and cultural barriers to FDI. 
C) Japan's receipts of FDI are third in the world. 
D) None of the above 
A) Japan receives as much FDI as it exports, making it a major player on both fronts. 
B) Japan plays a relatively minor role, reflecting a variety of legal, economic, and cultural barriers to FDI. 
C) Japan's receipts of FDI are third in the world. 
D) None of the above

Question 16

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 above 
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 above

Question 17

Which of the following is the most disingenuous argument in favor of FDI?

Accepted Answer

A) Shareholder diversification 
B) The internalization theory of FDI 
C) The promise of synergistic gains 
D) Vertical integration 
A) Shareholder diversification 
B) The internalization theory of FDI 
C) The promise of synergistic gains 
D) Vertical integration

Question 18

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 above 
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 above

Question 19

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

Accepted Answer

A) The theory was developed in the 1960s when the U.S. was the leader in R&D. 
B) The international system of production is becoming too complicated to be explained by a simple version of the product life cycle theory. 
C) It predicts that over time the U.S. switches from an exporting country of new products to an importing country. 
D) All of the above 
A) The theory was developed in the 1960s when the U.S. was the leader in R&D. 
B) The international system of production is becoming too complicated to be explained by a simple version of the product life cycle theory. 
C) It predicts that over time the U.S. switches from an exporting country of new products to an importing country. 
D) All of the above

Question 20

Under a 1981 Voluntary Trade Agreement Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. As a result

Accepted Answer

A) they exited the market. 
B) Honda was motivated to circumvent the trade barriers. 
C) Honda's FDI may have been part of an overall corporate strategy designed to bolster their competitive position vis-à-vis their domestic rivals such as Toyota. 
D) both b and c 
A) they exited the market. 
B) Honda was motivated to circumvent the trade barriers. 
C) Honda's FDI may have been part of an overall corporate strategy designed to bolster their competitive position vis-à-vis their domestic rivals such as Toyota. 
D) both b and c

In a push to serve the North American market Samsung, a Korean firm, chose to locate production facilities in Mexico, mainly because

Following Honda's FDI in the U.S.,

Cross-border acquisitions are generally found to be synergy-generating corporate activities.

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

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

Political risk refers to:

U.S. car makers were forced to build their own network of dealerships to enter the Japanese market.

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

The United States is the largest initiator, of FDI. The largest recipient of FDI is

Honda's decision to build a plant in Ohio

Labor services in a country can be severely underpriced relative to its productivity

Trade barriers can arise naturally. Which of the following are natural barriers to trade?

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

Japan plays a major role as an exporter of FDI. As a recipient of FDI,

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.

Which of the following is the most disingenuous argument in favor of FDI?

According to Raymond Vernon (1966),

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

Under a 1981 Voluntary Trade Agreement Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. As a result

Globalization and the Multinational Firm

International Monetary System

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

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Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

In a push to serve the North American market Samsung, a Korean firm, chose to locate production facilities in Mexico, mainly because

Following Honda's FDI in the U.S.,

Cross-border acquisitions are generally found to be synergy-generating corporate activities.

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

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

Political risk refers to:

U.S. car makers were forced to build their own network of dealerships to enter the Japanese market.

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

The United States is the largest initiator, of FDI. The largest recipient of FDI is

Honda's decision to build a plant in Ohio

Labor services in a country can be severely underpriced relative to its productivity

Trade barriers can arise naturally. Which of the following are natural barriers to trade?

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

Japan plays a major role as an exporter of FDI. As a recipient of FDI,

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.

Which of the following is the most disingenuous argument in favor of FDI?

According to Raymond Vernon (1966),

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

Under a 1981 Voluntary Trade Agreement Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. As a result

Globalization and the Multinational Firm

International Monetary System

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