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A) $3.4 billion.
B) $8.7 trillion.
C) $19.2 trillion.
D) $30.8 trillion.
85) Firms from __________ had the largest total outstanding stock of direct overseas
investment at the beginning of 2018.
A) Germany
B) the United States
C) the United Kingdom
D) Japan
86) Many firms are choosing to locate production close to available resources as a way to
A) take advantage of factor endowments in overseas locations.
B) increase transportation options.
C) motivate employees.
D) improve efficiency.
87) The establishment of new facilities from the ground up is known as
A) cross-border acquisition.
B) exporting.
C) greenfield investment.
D) gray market trade.
88) The purchase of an existing business in another nation is known as a
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A) cross-border acquisition.
B) strategic alliance.
C) greenfield investment.
D) home country expansion.
89) The monopolistic advantage theory suggests that firms in oligopolistic industries are
likely to ________ foreign direct investment when they have technical and other advantages over
indigenous firms.
A) increase
B) reduce
C) ignore
D) not change
90) The monopolistic advantage theory states that
A) a firm that has a monopoly has a major advantage in overseas investment.
B) FDI is made by firms in oligopolistic industries possessing technical advantages over
local companies.
C) a firm that has a monopoly domestically will have no competition making overseas
investments.
D) the firm making the overseas investment first has a monopolistic advantage.
91) An industry that has a limited number of competing firms, such as the U.S. mobile phone
market in which four firms controlled 98 percent of the market in 2018, is known as
A) perfect competition.
B) a monopoly.
C) an oligopolistic industry.
D) deregulated.
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92) The theory suggesting that rivalry between firms in an oligopolistic industry will result in
firms closely following and imitating each other’s international investments in order to keep a
competitor from gaining an advantage is known as
A) internalization theory.
B) internationalization theory.
C) strategic behavior theory.
D) competitive imitation theory.
93) The theory that to obtain a higher return on its investment, a firm will transfer its superior
knowledge to a foreign subsidiary that it controls, rather than sell it in the open market is known
as
A) internalization theory.
B) internationalization theory.
C) strategic behavior theory.
D) dynamic capabilities theory.
94) The theory that for a firm to successfully invest overseas, it must have not only
ownership of unique knowledge or resources, but also the ability to dynamically create, sustain,
and exploit these capabilities over time, is known as
A) internalization theory.
B) internationalization theory.
C) strategic behavior theory.
D) dynamic capabilities theory.
95) Dunning’s eclectic theory of international production states that if a firm is going to
invest in production facilities abroad, it must have the following kinds of advantages:
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A) ownership-specific, location-specific, and internationalization.
B) strategic, organizational, and technological.
C) ownership-specific, location-specific, and internalization.
D) technological, financial, and human resource.
FILL IN THE BLANK. Write the word or phrase that best completes each statement or
answers the question.
96) The amount by which the value of imports into a nation exceeds the value of its exports is
known as the country’s ________.
97) The amount by which the value of a nation’s exports exceeds the value of its imports is
known as the country’s ________.
98) ________ refers to a nation’s ability to produce more of a good or service than another
country for the same or lower cost of inputs.
99) The economic theory known as ________ viewed precious metals like gold and silver as
the only source of wealth, and the accumulation of these metals was an essential part of a
nation’s welfare.
100) When one nation is less efficient than another nation in the production of each of two
goods, the less efficient nation has a ________ in the production of that good for which its
absolute disadvantage is less.
101) ________ refers to a reduction in the value of a country’s currency relative to other
currencies.
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102) Economist Stefan Linder proposed his theory of ________, which argues for the
existence of similar preferences and demand for products and services among nations with
similar levels of per capita income.
103) ________ refers to the predictable decline in the average cost of producing each unit of
output as a production facility gets larger and output increases.
104) The rising scale on which efficiency improves as a result of cumulative experience and
learning is known as the ________.
105) The purchase of stocks and bonds to obtain a return on the funds invested is known as
________.
106) The purchase of sufficient stock in a firm to obtain significant management control is
known as ________.
107) The vast proportion of outward FDI, about two-thirds, still originates from the ________
countries.
108) Much of the world’s outward FDI has been associated with mergers and ________,
including, historically, approximately two-thirds of the value of corporate investments made in
the United States from abroad.
109) ________ refers to the establishment of new facilities from the ground up.
110) A(n) ________ is an industry with a limited number of competing firms.
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111) The ________ theory suggests that competitive rivalry between firms in an oligopolistic
industry will result in firms closely following and imitating each other’s international
investments to keep other firms from gaining an advantage.
112) ________ theory states that to obtain a higher return on its investment, a firm will
transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the
open market.
113) ________ theory states that for a firm to successfully invest overseas, it must have not
only ownership of unique knowledge or resources, but also the ability to dynamically create,
sustain, and exploit these capabilities over time.
114) The ________ theory of international production proposes that for a firm to invest in
facilities overseas, it must have three kinds of advantages: ownership specific, location specific,
and internalization.
115) Dunning’s theory of international production proposed that for a firm to invest in facilities
overseas, it must have three kinds of advantages: ownership specific, location specific, and
________.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
116) Discuss the advantages of focusing attention on a nation that is already a sizable
purchaser of goods coming from the exporter’s home country.
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117) Explain the logic of mercantilism and why it is generally viewed as a deficient theory.
118) Discuss the theory of absolute advantage and how it explains the basis for trade between
nations.
119) Discuss the keystone of international trade, the theory of comparative advantage.
120) Discuss the international product life cycle theory.
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Answer Key
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