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testbank8

CHAPTER9

INTERNATIONALFACTORMOVEMENTSAND

MULTINATIONALENTERPRISES

MULTIPLE-CHOICEQUESTIONS

1.“Riskspreading”isamotivemostlikelytobeservedwhenfirmsundergo:

a.Horizontalintegration

b.Verticalintegration

c.Conglomerateintegration

d.Noneoftheabove

2.Thesource（home）locationofmostoftheworld’sleadingmultinationalenterprisesis:

a.NorthAmericaandEurope

b.NorthAmericaandAsia

c.EuropeandSouthAmerica

d.EuropeandAsia

3.Whichtypeofmultinationaldiversificationoccurswhentheparentfirmestablishesforeignsubsidiariestoproduceintermediategoodsgoingintotheproductionoffinishedgoods?

a.Forwardverticalintegration

b.Backwardverticalintegration

c.Forwardhorizontalintegration

d.Backwardhorizontalintegration

4.SupposethatanAmericanautomobilemanufacturerestablishesforeignsubsidiariestomarkettheautomobiles.Thispracticeisreferredtoas:

a.Forwardverticalintegration

b.Forwardconglomerateintegration

c.Backwardverticalintegration

d.Backwardconglomerateintegration

5.SupposethatasteelmanufacturerheadquarteredinJapansetsupasubsidiaryinCanadatoproducesteel.Thispracticeisreferredtoas:

a.Conglomerateintegration

b.Forwardverticalintegration

c.Backwardverticalintegration

d.Horizontalintegration

6.Duringthe1970s,Americanoilcompaniesacquirednonenergycompanies（e.g.,copper,autocomponents）inresponsetoanticipateddecreasesininvestmentopportunitiesinoil.Thistypeofdiversificationisreferredtoas:

a.Horizontalintegration

b.Conglomerateintegration

c.Forwardverticalintegration

d.Backwardverticalintegration

7.Whichofthefollowingbestreferstotheoutrightconstructionorpurchaseabroadofproductivefacilities,suchasmanufacturingplants,bydomesticresidents?

a.Directinvestment

b.Portfolioinvestment

c.Short-termcapitalinvestment

d.Long-termcapitalinvestment

8.Inrecentyears,thelargestamountofU.S.directinvestmentabroadhasoccurredin:

a.CentralAmerica

b.SouthAmerica

c.Europe

d.Japan

9.Inrecentyears,mostforeigndirectinvestmentintheUnitedStateshascomefrom:

a.WesternEurope

b.CentralAmerica

c.SouthAmerica

d.Asia

10.MostU.S.directinvestmentabroadoccursin:

a.Communications

b.Petroleum

c.Financeandinsurance

d.Manufacturing

11.MostforeigndirectinvestmentintheUnitedStatesoccursin:

a.Publicutilities

b.Communications

c.Manufacturing

d.Miningandsmelting

12.Whichofthefollowingisnotasignificantmotivefortheformationofmultinationalenterprises?

a.Avoidingtariffsbyobtainingforeignmanufacturingfacilities

b.Obtainingthebenefitsfromoverseascomparativeadvantages

c.Theacquisitionofnaturalresourcesupplysources

d.Subsidiesgrantedbythehomegovernmenttooverseascorporations

13.SupposeGeneralMotorschargesitsMexicansubsidiary$1millionforautoassemblyequipmentthatcouldbepurchasedontheopenmarketfor$800,000.Thispracticeisbestreferredtoas:

a.Internationaldumping

b.Cost-pluspricing

c.Transferpricing

d.Technologicaltransfer

14.Multinationalenterprisesmayprovidebenefitstotheirsource（home）countriesbecausetheymay:

a.Securerawmaterialsforthesourcecountry

b.Shiftsourcecountrytechnologyoverseasvialicensing

c.Exportproductswhichreflectsource-countrycomparativedisadvantage

d.Resultinlowerwagesforsource-countryworkers

15.Tradeanalysisinvolvingmultinationalenterprisesdiffersfromourconventionaltradeanalysisinthatmultinationalenterpriseanalysisemphasizes:

a.Absolutecostdifferentialsratherthancomparativecostdifferentials

b.Theinternationalmovementoffactorinputsratherthanfinishedgoods

c.Purelycompetitivemarketsratherthanimperfectlycompetitivemarkets

d.Portfolioinvestmentsratherthandirectforeigninvestments

16.Directforeigninvestmenthastakenallofthefollowingformsexcept:

a.Investorsbuyingbondsofanexistingfirmoverseas

b.Thecreationofawhollyownedbusinessenterpriseoverseas

c.Thetakeoverofanexistingcompanyoverseas

d.Theconstructionofamanufacturingplantoverseas

17.WhichofthefollowingwouldbestexplainwhyforeigndirectinvestmentmightbeattractedtotheUnitedStates?

a.U.S.priceceilingsthatholddownthepriceofenergy

b.U.S.wageratesexceedingtheproductivityofU.S.labor

c.ArtificiallyhighpricesbeingchargedforthestockofU.S.firms

d.AnticipationsoffuturereductionsinU.S.tarifflevels

18.BothCoca-ColaCo.andPepsi-ColaCo.aremultinationalfirmsinthattheirsoftdrinksarebottledthroughouttheworld.Thispracticeillustrates:

a.Backwardverticalintegration

b.Forwardverticalintegration

c.Horizontalintegration

d.Conglomerateintegration

19.Themarketpowereffectofaninternationaljointventurecanleadtowelfarelossesforthedomesticeconomyunlessoffsetbycostreductions.Whichtypeofcostreductionwouldnotleadtooffsettingwelfaregainsfortheoveralleconomy?

a.R&Dgeneratingimprovedtechnology

b.Developmentofmoreproductivemachinery

c.Newworkrulespromotingworkerefficiency

d.Lowerwagesextractedfromworkers

20.Allofthefollowingarepotentialadvantagesofaninternationaljointventureexcept:

a.Sharingresearchanddevelopmentcostsamongcorporations

b.Forestallingprotectionismagainstimports

c.Establishingworkrulespromotinghigherlaborproductivity

d.Operatingatdiseconomy-of-scaleoutputlevels

21.WhichtermbestdescribestheNewUnitedMotorManufacturingCo.?

a.Multinationalenterprise

b.Internationaljointventure

c.Multilateralcontract

d.Internationalcommodityagreement

22.Multinationalenterprises:

a.Increasethetransferoftechnologybetweennations

b.Makeitharderfornationstofosteractivitiesofcomparativeadvantage

c.Alwaysenjoypoliticalharmonyinnationswheretheirsubsidiariesoperate

d.Requiregovernmentalsubsidiesinordertoconductworldwideoperations

23.Firmsundertakemultinationaloperationsinorderto:

a.Hirelow-wageworkers

b.Manufactureinnationstheyhavedifficultyexportingto

c.Obtainnecessaryfactorinputs

d.Alloftheabove

24.Multinationalenterprisesfaceproblemssincethey:

a.Cannotbenefitfromtheadvantagesofcomparativeadvantage

b.Mayraisepoliticalproblemsincountrieswheretheirsubsidiariesoperate

c.Caninvestonlyathome,butnotoverseas

d.Caninvestonlyoverseas,butnotathome

25.AmericanlaborunionshaverecentlymaintainedthatU.S.multinationalenterpriseshavebeen:

a.ExportingAmericanjobsbyinvestingoverseas

b.ExportingAmericanjobsbykeepinginvestmentintheUnitedStates

c.ImportingcheapforeignworkersbyshiftingU.S.investmentoverseas

d.ImportingcheapforeignworkersbykeepingU.S.investmentathome

26.AmericanlaborunionsaccuseU.S.multinationalfirmsofallofthefollowingexceptthatsuchfirms:

a.Enjoyunfairadvantagesintaxation

b.Exportjobsbyshiftingtechnologyoverseas

c.Exportjobsbyshiftinginvestmentoverseas

d.Operateatoutputlevelswherescaleeconomiesoccur

27.Whichofthefollowingreferstothepricechargedforproductssoldtoasubsidiaryofamultinationalenterprisebyanothersubsidiaryinanothernation?

a.Transferpricing

b.Internationaldumping

c.Pricediscrimination

d.Full-costpricing

28.Whichbusinessdeviceinvolvesthecreationofanewbusinessbytwoormorecompanies,oftenforalimitedperiodoftime?

a.Multinationalenterprise

b.Internationaljointventure

c.Horizontalmerger

d.Verticalmerger

29.Internationaljointventurescanleadtowelfarelosseswhenthenewlyestablishedfirm:

a.Addstothepreexistentproductivecapacity

b.Entersmarketsneitherparentcouldhaveenteredindividually

c.Yieldscostreductionsunavailabletoparentfirms

d.Givesrisetoincreasedamountsofmarketpower

30.Multinationalenterprises:

a.Alwaysproduceprimarygoods

b.Alwaysproducemanufacturedgoods

c.Produceprimarygoodsormanufacturedgoods

d.Noneoftheabove

Figure9.1illustratesthemarketconditionsfacingSonyCompanyandAmericanCompanyinitiallyoperatingascompetitorsinthedomesticball-bearingmarket.Eachfirmrealizesconstantlong-runcosts,MC0 = AC0.AnswertheQuestions31–37onthebasisofthisinformation.

Figure9.1. InternationalJointVenture

31.ConsiderFigure9.1.WithSonyCompanyandAmericanCompanybehavingascompetitors,theequilibriumpriceandoutputrespectivelyequal:

a.$4and2units

b.$4and4units

c.$6and2units

d.$6and4units

32.ConsiderFigure9.1.AttheequilibriumpricethatwascalculatedinQuestion#31,domestichouseholdsattain________ofconsumersurplus.

a.$4

b.$8

c.$12

d.$16

33.ConsiderFigure9.1.SupposethatSonyCompanyandAmericanCompanyjointlyformanewfirm,VentureCompany,whoseballbearingsreplacetheoutputsoldbytheparentsinthedomesticmarket.AssumingthatVentureCompanyoperatesasamonopolyandthatitscostsequalMC0 = AC0,thefirm’sprice,output,andtotalprofitwouldrespectivelyequal:

a.$6,2units,$4

b.$4,2units,$2

c.$6,4units,$4

d.$4,4units,$2

34.ConsiderFigure9.1.ComparedtothemarketequilibriumpositionachievedbySonyCompanyandAmericanCompanyascompetitors,VentureCompanyasamonopolyleadstoadeadweightlossofconsumersurplusof:

a.$2

b.$4

c.$6

d.$8

35.ConsiderFigure9.1.AssumeVentureCompany’sformationyieldsnewcostreductions,indicatedbyMC1 = AC1,whichresultfromtechnologicaladvances.RealizingthatVentureCompanyresultsinadeadweightlossofconsumersurplus,th