Question 1

MNEs encounter sunk costs when they face an obsolescing bargain with the host country.

Accepted Answer

A) True 
 B)False  True

Question 2

_____ is a type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country.

Accepted Answer

A)   Horizontal FDI
B)   Vertical FPI
C)   Backward vertical FDI
D)   Platform FDI A

Question 3

Intrafirm trade refers to international transactions between two subsidiaries in a country controlled by two different MNEs.

Accepted Answer

A) True 
 B)False  False

Question 4

Differentiate between the primary characteristics of horizontal and vertical FDI.

Accepted Answer

The answer of Differentiate between the primary characteristics of horizontal...

Question 5

Investing in FDI will increase the home firm's exports of components and services.

Accepted Answer

A) True 
 B)False

Question 6

_____ refers to the total accumulation of inbound FDI in a country or outbound FDI from a country.

Accepted Answer

A)   FDI flow
B)   FDI stock
C)   Horizontal FDI
D)   Vertical FDI

Question 7

Compared to licensing,FDI increases dissemination risks.

Accepted Answer

A) True 
 B)False

Question 8

A firm manufacturing clocks in its home country and through FDI is an example of downstream vertical FDI.

Accepted Answer

A) True 
 B)False

Question 9

_____ refers to the deal struck by MNEs and host governments,which change their requirements after the initial FDI entry.

Accepted Answer

A)   Obsolescing bargain
B)   Integrative bargain
C)   Automated bargain
D)   Ongoing bargain

Question 10

Firms prefer FDI to licensing because FDI_____.

Accepted Answer

A)   increases the chances of opportunism when dealing with a host nation entity
B)   requires complete dissemination of technological know-how to host nation entity
C)   protects the firm from economic agglomeration
D)   provides the firm with direct ownership to its foreign assets

Question 11

_____ refers to the clustering of economic activities in certain locations.

Accepted Answer

A)   Internalization
B)   Expropriation
C)   Agglomeration
D)   Intrafirm trade

Question 12

Knowledge spillover refers to _____.

Accepted Answer

A)   the risk associated with unauthorized diffusion of firm-specific know-how
B)   a violation of the knowledge and IP rights secured by a copyright
C)   knowledge diffused from one firm to others among closely located firms
D)   the imperfect rules governing international transactions

Question 13

The demonstration effect refers to the ability of a firm to engage in an upstream stage of the value chain in a host country.

Accepted Answer

A) True 
 B)False

Question 14

_____ is the amount of FDI moving in a given period (usually a year)in a certain direction.

Accepted Answer

A)   FDI stock
B)   FDI flow
C)   Horizontal FDI
D)   Vertical FDI

Question 15

_____ suggests that FDI,unrestricted by government intervention,will enable countries to tap into their absolute or comparative advantages by specializing in the production of certain goods or services.

Accepted Answer

A)   The radical view
B)   The free-market view
C)   Pragmatic nationalism
D)   The monopolistic view

Question 16

Expropriation refers to the knowledge diffused from one firm to others among closely located firms.

Accepted Answer

A) True 
 B)False

Question 17

FDI is more suitable if the activity is marginal and common across multiple end-user industries.

Accepted Answer

A) True 
 B)False

Question 18

An FPI does not provide management control rights to the investing firm.

Accepted Answer

A) True 
 B)False

Question 19

Harton,a car manufacturer based in UK,only assembles cars and does not manufacture components in the UK.But in France,Harton enters into components manufacturing through FDI.Harton's investment in France would be an example of a(n)_____.

Accepted Answer

A)   FPI
B)   downstream vertical FDI
C)   upstream vertical FDI
D)   horizontal FDI

Question 20

If a firm engages in final assembly in its home operations,then which of the following operations of the firm in a foreign country would be considered a downstream vertical FDI?

Accepted Answer

A)   Research and development
B)   Components procurement
C)   Marketing
D)   Final assembly

Exam 6: Investing Abroad Directly

MNEs encounter sunk costs when they face an obsolescing bargain with the host country.

_____ is a type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country.

Intrafirm trade refers to international transactions between two subsidiaries in a country controlled by two different MNEs.

Differentiate between the primary characteristics of horizontal and vertical FDI.

Investing in FDI will increase the home firm's exports of components and services.

_____ refers to the total accumulation of inbound FDI in a country or outbound FDI from a country.

Compared to licensing,FDI increases dissemination risks.

A firm manufacturing clocks in its home country and through FDI is an example of downstream vertical FDI.

_____ refers to the deal struck by MNEs and host governments,which change their requirements after the initial FDI entry.

Firms prefer FDI to licensing because FDI_____.

_____ refers to the clustering of economic activities in certain locations.

Knowledge spillover refers to _____.

The demonstration effect refers to the ability of a firm to engage in an upstream stage of the value chain in a host country.

_____ is the amount of FDI moving in a given period (usually a year) in a certain direction.

_____ suggests that FDI,unrestricted by government intervention,will enable countries to tap into their absolute or comparative advantages by specializing in the production of certain goods or services.

Expropriation refers to the knowledge diffused from one firm to others among closely located firms.

FDI is more suitable if the activity is marginal and common across multiple end-user industries.

An FPI does not provide management control rights to the investing firm.

Harton,a car manufacturer based in UK,only assembles cars and does not manufacture components in the UK.But in France,Harton enters into components manufacturing through FDI.Harton's investment in France would be an example of a(n) _____.

If a firm engages in final assembly in its home operations,then which of the following operations of the firm in a foreign country would be considered a downstream vertical FDI?