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Incoterms 2010 and International Business - Wild - Chapter 7 - QUIZ Incoterms 2010 and International Business - 101

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Chapter 7 Foreign Direct Investment

Incoterms 2010 - Guides - FCA Incoterms 2010 - Guides - EXW 1) The purchase of physical assets or a significant amount of ownership of a company in another country to gain a measure of management control is called ________.

Incoterms 2010 and International Business - Wild -... Incoterms 2010 - Guides - CIF

1. A) portfolio investment 2. B) foreign direct investment 3. C) horizontal integration 4. D) vertical integration

Incoterms 2010 and International Business - 101 - ... Incoterms 2010 and International Business - 101 - ...

Answer: B AACSB: Application of knowledge

Incoterms 2010 and International Business - 101 - ... Incoterms 2010 - Guides - Reviews

Skill: Concept

Incoterms 2010 - Guides - Overview

Difficulty: Easy

Incoterms 2010 - Guides Introductions

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

Incoterms 2010 - Guides - CFR Incoterms 2010 - Guides - FOB

2) ________ is an investment that does not involve obtaining a degree of control in a company.

1. A) Portfolio investment 2. B) Foreign direct investment 3. C) Horizontal integration 4. D) Vertical integration Answer: A AACSB: Application of knowledge

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -...

Skill: Concept

Incoterms 2010 and International Business - Wild -...

Difficulty: Easy

Incoterms 2010 and International Business - Wild -...

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -...

3) Which of the following is a major driver of foreign direct investment?

1. A) vertical integration 2. B) horizontal integration 3. C) globalization 4. D) cultural diversity

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -...

Answer: C

Incoterms 2010 and International Business - Wild -...

AACSB: Application of knowledge

Incoterms 2010 and International Business - Wild -...

Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -...

4) A(n) ________ advantage is the one that a company gains from incorporating a business activity within itself rather than leaving it to a relatively inefficient market.

1. A) ownership 2. B) internalization 3. C) location 4. D) comparative Answer: B AACSB: Application of knowledge

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -...

Skill: Concept

Incoterms 2010 and International Business - Wild -...

Difficulty: Easy

Incoterms 2010 and International Business - Wild -...

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

5) Exports and imports of tourism and business consulting are included in the ________ account of a country's balance of payments.

1. A) services 2. B) merchandise 3. C) capital 4. D) savings Answer: A AACSB: Application of knowledge

Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Wild -... Incoterms 2010 and International Business - Daniel... Incoterms 2010 and International Business - Daniel... Incoterms 2010 and International Business - Daniel...

Skill: Concept

Incoterms 2010 and International Business - Daniel...

Difficulty: Easy

Incoterms 2010 and International Business - Daniel...

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

Incoterms 2010 and International Business - Daniel... Incoterms 2010 and International Business - Daniel...

6) Exports and imports of tangible goods are included in the ________ account of a country's balance of payments.

1. A) savings 2. B) capital 3. C) merchandise 4. D) services Answer: C AACSB: Application of knowledge

International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ...

Skill: Concept

International Business - Daniels - 15th Edition - ...

Difficulty: Easy

International Business - Daniels - 15th Edition - ...

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

International Business - Daniels - 15th Edition - ...

7) Exports and imports of computer software, electronic components, and apparel are included in the ________ account of a country's balance of payments.

1. A) services 2. B) capital 3. C) merchandise 4. D) savings Answer: C AACSB: Application of knowledge

International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ...

Skill: Concept

International Business - Daniels - 15th Edition - ...

Difficulty: Easy

International Business - Daniels - 15th Edition - ...

LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

International Business - Daniels - 15th Edition - ... 8) When a U.S. company buys shares of stock in a French company on France's stock market, the U.S. balance of payments records the transaction as an ________.

1. A) outflow of capital with a plus sign

International Business - Daniels - 15th Edition - ... International Business - Daniels - 15th Edition - ...

2. B) outflow of capital with a minus sign 3. C) inflow of capital with a plus sign 4. D) inflow of capital with a minus sign

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Answer: B Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI). Scenario: Global Manufacturing Inc. (GMI) Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B.

9) GMI's investments are examples of ________.

1. A) foreign direct investment 2. B) portfolio investment 3. C) vertical integration 4. D) horizontal integration Answer: A AACSB: Analytical thinking Skill: Application Difficulty: Hard LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

10) Which of the following systems of production is used by GMI?

1. A) job

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2. B) craft 3. C) rationalized 4. D) customized Answer: C AACSB: Analytical thinking Skill: Application Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

11) GMI's purchase of the Brazilian company is best classified as a(n) ________.

1. A) greenfield investment 2. B) portfolio investment 3. C) acquisition 4. D) demerger Answer: C AACSB: Analytical thinking

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Skill: Application Difficulty: Hard LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

12) GMI's subsidiary for component B in Thailand is best described as a(n) ________.

1. A) greenfield investment 2. B) portfolio investment 3. C) acquisition 4. D) merger Answer: A AACSB: Analytical thinking Skill: Application Difficulty: Hard LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI). Scenario: Happyland Happyland is a country characterized by beautiful beaches, vast natural resources, and a highly skilled labor force. Happyland is now encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software programs. The net result of the trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad.

13) Happyland's international trade situation illustrates that the country is experiencing a ________.

1. A) current account deficit 2. B) capital account deficit 3. C) current account surplus 4. D) capital account surplus Answer: C AACSB: Analytical thinking Skill: Application Difficulty: Hard LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

14) Transactions involving the export of Happyland's textile and computer products are included in its ________ account.

1. A) capital 2. B) merchandise 3. C) services 4. D) income payments Answer: B AACSB: Application of knowledge

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Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

15) If Happyland advertises its beaches and attracts tourists, the tourism-related income would be recorded in its ________ account.

1. A) capital 2. B) services 3. C) income payments 4. D) merchandise Answer: B AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

16) If Happyland is successful in attracting foreign direct investment, transactions involving those investments would appear in the country's ________ account.

1. A) capital 2. B) services 3. C) income payments 4. D) merchandise Answer: A AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

Scenario: Blickinstock at the Crossroads Auto parts supplier, Blickinstock Ltd., would like to expand its presence in Latin America. To that end, Blickinstock is trying to decide whether to purchase an existing company in a remote region of Argentina or build its own subsidiary. Keith Moon, Blickinstock's vice president of global business development, will be making a presentation to the board outlining the company's options.

17) Blickinstock has identified a company that it can acquire or merge with. Which of the following statements would represent the least likely reason for Blickinstock to go ahead with the merger?

1. A) The merger would help increase Blickinstock's global competitiveness. 2. B) The merger would allow the company to get a foothold in the nascent Latin American market.

3. C) The merger would help to fill the gaps in Blickinstock's product line. 4. D) The merger would bring in increased cash-flows that Blickinstock can use to acquire other firms.

Answer: D AACSB: Application of knowledge Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

18) If board members ask about the maquiladora industry, Keith would explain that it refers to ________.

1. A) Mexico's low-cost labor union 2. B) the cross-border drug trafficking problem that threatens to limit legitimate production in Mexico

3. C) the low-wage, 130-mile-wide strip along the U.S.-Mexico border that comprises a special economic region

4. D) Latin America's new model for business that restricts foreign investors to take advantage of government incentives Answer: C AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

19) Not all factors of production are internationally mobile. Answer: TRUE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

20) Portfolio investment is the purchase of physical assets of a company in another country to gain a degree of management control. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI). 21) Increasing globalization is causing a growing number of international companies from emerging markets to undertake FDI. Answer: TRUE AACSB: Application of knowledge

Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

22) Developed countries have been the major participants behind cross-border mergers and acquisitions. Answer: TRUE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

23) Firms from emerging markets account for a greater share of global mergers and acquisitions than developed markets. Answer: TRUE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

24) In foreign direct investment, complete ownership of a company guarantees its complete control. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

25) Building a subsidiary abroad from the ground up is called a greenfield investment. Answer: TRUE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

26) The soaring cost of developing subsequent stages of technology has led multinationals to engage in cross-border alliances and acquisitions. Answer: TRUE

AACSB: Application of knowledge Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

27) In industries having a limited number of small firms, foreign direct investment decisions frequently resemble a "follow the leader" scenario. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI). 28) A majority of the regulatory changes that governments around the world introduced in recent years are unfavorable to FDI. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

29) The merchandise account includes exports and imports of tangible goods. Answer: TRUE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

30) The income payments account includes income earned on home country assets held abroad. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

31) A current account deficit occurs when a country exports more goods and receives more income from abroad than it imports and pays abroad. Answer: FALSE AACSB: Application of knowledge

Skill: Concept Difficulty: Moderate LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI).

32) One reason a home country may discourage foreign direct investment outflows is to protect its "sunset" industries. Answer: FALSE AACSB: Application of knowledge Skill: Concept Difficulty: Easy LO: 7.1: Describe the worldwide pattern of foreign direct investment (FDI). 33) What two factors propel growth in foreign direct investment? Answer: The two main drivers of FDI flows are globalization and international mergers and acquisitio...