MGMT 459 Exam II Review

A firm establishing a manufacturing plant in a foreign country due to the cheap labor costs in that country is an example of the _____ advantage that the firm enjoys.

• location

• ownership

• internalization

• externalization

_____ refers to price setting at a level higher than the competitive level by monopolists.

• Collusive price setting

• Predatory pricing

• Mark-up pricing

• Dumping

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?

• Research and development

• Components procurement

• Marketing

• Final assembly

Firms prefer FDI to licensing because FDI_____.

• increases the chances of opportunism when dealing with a host nation entity

• requires complete dissemination of technological know-how to host nation entity

• protects the firm from economic agglomeration

• provides the firm with direct ownership to its foreign assets

An industry with heterogeneous products, in which rivals are forced to compete on price, is likely to lead to collusion.

• True

• False

Which of the following statements best describes an FDI?

• Setting up subsidiaries in foreign locations to do in-house work

• Turning over an organizational activity to an outside supplier to perform on behalf of the firm

• Outsourcing an in-house activity to another domestic firm

• Assigning firm activities to foreign firms in neighboring countries

Inside directors are more independent and can better safeguard shareholder interests.

• True

• False

If Apple, making smartphone, invests in iPhone dealerships in Asia but does not engage in distribution in the United States (Apple’s host country), then Apple’s Asian investment would be considered a(n) _____.

• downstream vertical FDI

• upstream vertical FDI

• horizontal FDI

• FPI

Mutual forbearance refers to retaliatory attacks on a competitor's other markets if this competitor attacks a firm's original market.

• True

• False

Which of the following is a primary cost of FDI to home countries?

• Loss of sovereignty

• Increase in local competition

• Capital outflow and job loss

• Increased exports of components and services to host countries