Question 1

According to the international product life cycle theory,in which of the following stages is a good produced in the home country because of uncertain domestic demand and to keep production close to the research department?

Accepted Answer

A) Standardized product stage 
B) Maturing product stage 
C) Declining product stage 
D) New product stage

Question 2

Governments intervene to keep their balance of payments under control for all of the following reasons EXCEPT ____________.

Accepted Answer

A) to impose local content requirements. 
B) to create exports generated by the new production operation. 
C) to boost the balance to payments from an initial FDI 
D) to transfer assets back to the home country

Question 3

A market imperfection that can encourage foreign direct investment is the possibility that a company will create a future competitor by charging another company for access to its knowledge.

Accepted Answer

A) True 
 B)False

Question 4

The goods account records export of services.

Accepted Answer

A) True 
 B)False

Question 5

A subsidiary built abroad from the ground up is called a(n)________.

Accepted Answer

A) portfolio investment 
B) distributive channel 
C) acquisition 
D) greenfield investment

Question 6

Using any two of the four theories that appear in your text,explain why companies engage in foreign direct investment.

Accepted Answer

The answer of Using any two of the four theories...

Question 7

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 investment.

Accepted Answer

The answer of The ________ theory states that firms undertake...

Question 8

Many early trade theories were created at a time when most factors of production either could not be moved or could not be moved easily across national borders.

Accepted Answer

A) True 
 B)False

Question 9

Scenario: Global Manufacturing,Inc.(GMI)
GMI is a fast-growing Canadian 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 subsidiary for component B in Thailand can be best described as a(n)________.

Accepted Answer

A) greenfield investment 
B) acquisition 
C) portfolio investment 
D) merger

Question 10

In foreign direct investment,100 percent ownership of a company does not guarantee its complete control.

Accepted Answer

A) True 
 B)False

Question 11

Building a subsidiary abroad from the ground up is called a(n)________.

Accepted Answer

The answer of Building a subsidiary abroad from the ground...

Question 12

The practice of "following clients" can be expected in industries having ________.

Accepted Answer

A) few suppliers 
B) many suppliers 
C) supply clusters 
D) suppliers and manufacturers with close working relationships

Question 13

Which of the following is an example of a greenfield investment?

Accepted Answer

A) A business acquisition in Southeast Asia's former agricultural region 
B) The construction of an entirely new manufacturing subsidiary overseas 
C) A merger between a US and non-US company 
D) The purchase of an existing business that is still in its infancy

Question 14

The ________ account within the current account includes income earned on Canadian assets held abroad.

Accepted Answer

The answer of The ________ account within the current account...

Question 15

One reason a home country may discourage foreign direct investment outflows is to protect its "sunset" industries.

Accepted Answer

A) True 
 B)False

Question 16

Rationalized production is a system of production in which each of a product's components is produced in the location where the cost of producing that component is lowest.

Accepted Answer

A) True 
 B)False

Question 17

Scenario: Global Manufacturing,Inc.(GMI)
GMI is a fast-growing Canadian 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 examples of ________.

Accepted Answer

A) foreign direct investment 
B) portfolio investment 
C) merger 
D) horizontal integration

Question 18

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

Accepted Answer

A) new 
B) maturing 
C) standardized 
D) declining

Question 19

Scenario: Happyland
Happyland,a country of about 48 million people with beautiful beaches,vast natural resources,and a highly skilled labour force,is encouraging foreign direct investment inflows.The country has been exporting textiles,computer hardware,and software.The net result of trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad.
-If Happyland is successful at attracting foreign investment,transactions involving those investments would appear in the country's ________.

Accepted Answer

A) capital account 
B) service account 
C) income payments account 
D) merchandise account

Question 20

Canadian government exercises a high degree of control over the broadcasting sector because it ___________________.

Accepted Answer

A) wants to control the technology in broadcasting 
B) is considered critical to national security 
C) wants to control the type of programming offered 
D) wants to provide better working conditions to Canadians

Exam 7: Foreign Direct Investment

According to the international product life cycle theory,in which of the following stages is a good produced in the home country because of uncertain domestic demand and to keep production close to the research department?

Governments intervene to keep their balance of payments under control for all of the following reasons EXCEPT ____________.

A market imperfection that can encourage foreign direct investment is the possibility that a company will create a future competitor by charging another company for access to its knowledge.

The goods account records export of services.

A subsidiary built abroad from the ground up is called a(n) ________.

Using any two of the four theories that appear in your text,explain why companies engage in foreign direct investment.

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 investment.

Many early trade theories were created at a time when most factors of production either could not be moved or could not be moved easily across national borders.

In foreign direct investment,100 percent ownership of a company does not guarantee its complete control.

Building a subsidiary abroad from the ground up is called a(n)________.

The practice of "following clients" can be expected in industries having ________.

Which of the following is an example of a greenfield investment?

The ________ account within the current account includes income earned on Canadian assets held abroad.

One reason a home country may discourage foreign direct investment outflows is to protect its "sunset" industries.

Rationalized production is a system of production in which each of a product's components is produced in the location where the cost of producing that component is lowest.

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

Canadian government exercises a high degree of control over the broadcasting sector because it ___________________.