Question 1

General Electric and Boeing are examples of American companies that have greatly benefitted from the transfer of technology from China to the United States.

Accepted Answer

A) True 
 B)False

Question 2

47.Joint ventures may lead to

Accepted Answer

A)  welfare increases. 
B)  welfare decreases. 
C)  no changes in welfare. 
D)  All of these are correct.

Question 3

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

Accepted Answer

A)  forward vertical integration 
B)  backward vertical integration 
C)  forward horizontal integration 
D)  backward horizontal integration

Question 4

Foreign direct investment would occur if Mobile Inc.of the United States acquired sufficient common stock in a foreign oil company to assume voting control.

Accepted Answer

A) True 
 B)False

Question 5

The source (home) location of most of the world's leading multinational enterprises is

Accepted Answer

A)  North America and Europe. 
B)  North America and Asia. 
C)  Europe and South America. 
D)  Europe and Asia.

Question 6

Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000.This practice is BEST referred to as

Accepted Answer

A)  international dumping. 
B)  cost-plus pricing. 
C)  transfer pricing. 
D)  technological transfer.

Question 7

Which of the following is NOT a significant motive for the formation of multinational enterprises?

Accepted Answer

A)  avoiding tariffs by obtaining foreign manufacturing facilities 
B)  obtaining the benefits from overseas comparative advantages 
C)  the acquisition of natural resource supply sources 
D)  subsidies granted by the home government to overseas corporations

Question 8

There is universal agreement on an exact definition of a multinational enterprise.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel.This practice is referred to as

Accepted Answer

A)  conglomerate integration. 
B)  forward vertical integration. 
C)  backward vertical integration. 
D)  horizontal integration.

Question 10

If the size of the Canadian market is large enough to permit efficient production in Canada, a U.S.firm would profit by establishing a Canadian manufacturing subsidiary or licensing rights to a Canadian firm to manufacture and sell its product in Canada.

Accepted Answer

A) True 
 B)False

Question 11

Royal Dutch Shell, Walmart Stores, and Sinopec Group are among the world's smallest corporations in recent years.

Accepted Answer

A) True 
 B)False

Question 12

International joint ventures tend to yield a welfare-increasing market-power effect and a welfare-decreasing cost-reduction effect.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that a steel company locates a production facility near a source of iron.This is an example of

Accepted Answer

A)  a demand factor motive for foreign direct investment. 
B)  a cost factor motive for foreign direct investment. 
C)  a government policy motive for foreign direct investment. 
D)  a raw material motive for foreign direct investment.

Question 14

The United States has discouraged the "brain drain" problem by permitting the immigration of unskilled workers while restricting the immigration of skilled persons.

Accepted Answer

A) True 
 B)False

Question 15

Trade analysis involving multinational enterprises DIFFERS from our conventional trade analysis in that multinational enterprise analysis emphasizes

Accepted Answer

A)  absolute cost differentials rather than comparative cost differentials. 
B)  the international movement of factor inputs rather than finished goods. 
C)  purely competitive markets rather than imperfectly competitive markets. 
D)  portfolio investments rather than direct foreign investments.

Question 16

A joint venture leads to increases in national welfare if the cost-reduction effect is due to wage concessions and if it more than offsets the market-power effect.

Accepted Answer

A) True 
 B)False

Question 17

Under U.S.tax law, a parent American company can defer U.S.taxes paid on the income of its foreign subsidiary as long as that income is retained overseas rather than repatriated to the United States.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that a local firm in a foreign market is incapable of adapting its operations to a multinational enterprise's production process.In this case______________ is not the lowest-cost method of supplying goods abroad.

Accepted Answer

A)  licensing 
B)  foreign direct investment 
C)  direct exporting 
D)  backward integration

Question 19

Developing countries have sometimes feared open immigration policies of developed countries on the grounds that highly educated and skilled people may immigrate to the developed countries, thus limiting the growth potential of the developing countries.

Accepted Answer

A) True 
 B)False

Question 20

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC0=AC0.
Figure 9.1. International Joint Venture

-Consider Figure 9.1.At the equilibrium price, the domestic economy attains ____ of economic surplus.

Accepted Answer

A)  $4 
B)  $8 
C)  $12 
D)  $16

Exam 9: International Factor Movements and Multinational Enterprises

General Electric and Boeing are examples of American companies that have greatly benefitted from the transfer of technology from China to the United States.

47.Joint ventures may lead to

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

Foreign direct investment would occur if Mobile Inc.of the United States acquired sufficient common stock in a foreign oil company to assume voting control.

The source (home) location of most of the world's leading multinational enterprises is

Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000.This practice is BEST referred to as

Which of the following is NOT a significant motive for the formation of multinational enterprises?

There is universal agreement on an exact definition of a multinational enterprise.

Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel.This practice is referred to as

If the size of the Canadian market is large enough to permit efficient production in Canada, a U.S.firm would profit by establishing a Canadian manufacturing subsidiary or licensing rights to a Canadian firm to manufacture and sell its product in Canada.

Royal Dutch Shell, Walmart Stores, and Sinopec Group are among the world's smallest corporations in recent years.

International joint ventures tend to yield a welfare-increasing market-power effect and a welfare-decreasing cost-reduction effect.

Suppose that a steel company locates a production facility near a source of iron.This is an example of

The United States has discouraged the "brain drain" problem by permitting the immigration of unskilled workers while restricting the immigration of skilled persons.

Trade analysis involving multinational enterprises DIFFERS from our conventional trade analysis in that multinational enterprise analysis emphasizes

A joint venture leads to increases in national welfare if the cost-reduction effect is due to wage concessions and if it more than offsets the market-power effect.

Under U.S.tax law, a parent American company can defer U.S.taxes paid on the income of its foreign subsidiary as long as that income is retained overseas rather than repatriated to the United States.

Suppose that a local firm in a foreign market is incapable of adapting its operations to a multinational enterprise's production process.In this case______________ is not the lowest-cost method of supplying goods abroad.

Developing countries have sometimes feared open immigration policies of developed countries on the grounds that highly educated and skilled people may immigrate to the developed countries, thus limiting the growth potential of the developing countries.