Question

Answer all ten (10) questions on the multiple choice test. Each question is worth one mark.

QUESTION 1

Which is not a strategy used by governments to attract MNCs:

1. favourable tax treatment
2. tariff protection
3. foreign exchange privileges
4. limits on the repatriation of profits, dividends and royalties

Answer: _____

QUESTION 2

Dumping is the selling of goods:

1. At below their production costs
2. In a foreign market for less than their cost

(c)        Both a and b above

5. At higher than market value to unsuspecting customers

Answer: _____

QUESTION 3

Who does not gain from tariffs levied on imports?

1. Government
2. Domestic producers (at least in the short run)
3. Employees of protected industries keep their jobs
4. Consumers

Answer: _____

QUESTION 4

_____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

1. Trade alteration
2. Trade qualification
3. Trade diversion
4. Trade creation

Answer: _____

QUESTION 5

Three main costs of inward FDI concern host countries. These are:

1. the employment effect, the perceived loss of national sovereignty and autonomy, and the resource transfer effect
2. the possible adverse effects of FDI on competition with the host country, the resource transfer effect, and the perceived loss of national sovereignty and autonomy
3. the resource transfer effect, the employment effect, and the possible adverse effects of FDI on competition within the host country
4. the possible adverse effects of FDI on competition within the host country, adverse effects on the balance of payments, and the perceived loss of national sovereignty and autonomy.

Answer: _____

QUESTION 6

Which of the following selections accurately depicts the levels of economic integration from least integrated to most integrated?

1. Common market, economic union, full political union, free trade area, and customs union
2. Common union, economic union, full political union, free trade area, and customs union
3. Free trade area, customs union, common market, economic union, and full political union
4. Full political union, free trade area, common market, customs union, and economic union

Answer: _____

QUESTION 7

Host government use a range of controls to restrict FDI. The two most common are

1. monetary restraints and performance requirements.
2. technology transfer restraints and employment restraints.
3. ownership restraints and performance requirements.
4. employment restraints and repatriation limitations.

Answer: _____

QUESTION 8

How can FDI help a country achieve a current account surplus?

1. If the FDI is a substitute for exports of goods or services, the effect can be to improve the current account of the host country's balance of payments.
2. When the MNE uses a foreign subsidiary to import goods and services to other countries.
3. When the MNE uses a foreign subsidiary to export goods and services to other countries.
4. If the FDI is a substitute for imports of goods or services, the effect can be positive on the current account of the home-country's balance of payments.

Answer: _____

QUESTION 9

There are two basic strategies for locating manufacturing facilities. These are:

1. concentrating them in the optimal location and serve the world market from there and, concentrate them in markets that are parts of major trade blocks.
2. locate at least one manufacturing facility in each continent in which the firm is active and, concentrate manufacturing at an optimal location.
3. concentrate them in the optimal location and serve the world market from there and, decentralising them in various regional or national locations that are close to major markets.
4. concentrate them in markets that are part of major trade blocks and, centralising them at a single location.

Answer: _____

QUESTION 10

A ______ eliminates trade barriers between member countries and adopts a common external trade policy.

1. free trade area
2. global union
3. tariff union
4. customs union

Answer: _____

GLOBAL BUSINESS ASSESSMENT

Answer 1

1) Answer is d.limits on the repatriation of profits, dividends and royalties.

The reason is that if government restricts the repatriation of profits, dividends and royalties, it will not attract MNCs. MNCs are attracted with the ease in taxes and tariffs policies.

2)Answer is b.In a foreign market for less than their cost

Option a is not correct as it is related to reverse dumping if selled in the domestic market. Option b is correct as dumping is related to selling goods at low price in foreign market and at high price in the domestic market.

3)Answer is d. consumers

Tariffs are paid by consumers of the imported goods and are collected by the custom authority. Therefore, consumer doesn't gain from the tariffs levied on imports. Other options are correct as they are benefited in one form or the other.

4) Answer is d. Trade creation

Trade creation is realted to shifting to low cost producers within the free tade for economic welfare. It will result in reduction in tariffs and low price. Option c. tade diversion is not correct as it is related to shifting producers within the trade union.

5)Answer is d. the possible adverse effects of FDI on competition within the host country, adverse effects on the balance of payments, and the perceived loss of national sovereignty and autonomy.

6)Answer is c.Free trade area, customs union, common market, economic union, and full political union

7)Answer is c.ownership restraints and performance requirements.

8) Answer is d.If the FDI is a substitute for imports of goods or services, the effect can be positive on the current account of the home-country's balance of payments.

9) Answer is c.concentrate them in the optimal location and serve the world market from there and, decentralising them in various regional or national locations that are close to major markets.

10)Answer is d.customs union