Review Quiz for Chapter 7: Foreign Direct Investment

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 ________.
A) portfolio investment
B) foreign direct investment
C) horizontal integration
D) vertical integration

2) ________ is an investment that does not involve obtaining a degree of control in a company.
A) Portfolio investment
B) Foreign direct investment
C) Horizontal integration
D) Vertical integration

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

A) vertical integration
B) horizontal integration
C) globalization
D) cultural diversity

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.
A) ownership
B) internalization
C) location
D) comparative

5) Exports and imports of tourism and business consulting are included in the ________ account
of a country's balance of payments.
A) services
B) merchandise
C) capital
D) savings

6) Exports and imports of tangible goods are included in the ________ account of a country's
balance of payments.
A) savings
B) capital
C) merchandise
D) services

7) Exports and imports of computer software, electronic components, and apparel are included in
the ________ account of a country's balance of payments.
A) services
B) capital
C) merchandise
1
Copyright © 2016 Pearson Education, Inc.
D) savings

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 ________.
A) outflow of capital with a plus sign
B) outflow of capital with a minus sign ( dòng vốn có dấu trừ)
C) inflow of capital with a plus sign
D) inflow of capital with a minus sign

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.
(Kịch bản: Blickinstock ở Ngã tư
Nhà cung cấp phụ tùng ô tô, Blickinstock Ltd., muốn mở rộng sự hiện diện của mình ở Mỹ
Latinh. Để đạt được mục tiêu đó, Blickinstock đang cố gắng quyết định mua một công ty hiện có
ở một vùng xa xôi của Argentina hay xây dựng công ty con của riêng mình. Keith Moon, phó
chủ tịch phụ trách phát triển kinh doanh toàn cầu của Blickinstock, sẽ thuyết trình trước hội đồng
về các lựa chọn của công ty.)

9) 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?
A) The merger would help increase Blickinstock's global competitiveness.
B) The merger would allow the company to get a foothold in the nascent Latin American market.
C) The merger would help to fill the gaps in Blickinstock's product line.
D) The merger would bring in increased cash-flows that Blickinstock can use to acquire
other firms.

10) If board members ask about the maquiladora industry, Keith would explain that it refers to
________.
A) Mexico's low-cost labor union
B) the cross-border drug trafficking problem that threatens to limit legitimate production in
Mexico
C) the low-wage, 130-mile-wide strip along the U.S.-Mexico border that comprises a special
economic region
D) Latin America's new model for business that restricts foreign investors to take advantage of
government incentives

11) Building a subsidiary abroad from the ground up is called a greenfield investment. (Xây
dựng công ty con ở nước ngoài ngay từ đầu được gọi là đầu tư vào trường xanh)
A. TRUE
B. FALSE

12) The soaring cost of developing subsequent stages of technology has led multinationals to
2
Copyright © 2016 Pearson Education, Inc.
engage in cross-border alliances and acquisitions.
A. TRUE
B. FALSE

3
Copyright © 2016 Pearson Education, Inc.
13) In industries having a limited number of small firms, foreign direct investment decisions
frequently resemble a "follow the leader" scenario.
A. TRUE
B. FALSE

14) A majority of the regulatory changes that governments around the world introduced in recent
years are unfavorable to FDI.
A. TRUE
B. FALSE

15) The merchandise account includes exports and imports of tangible goods.
A. TRUE
B. FALSE

16) The income payments account includes income earned on home country assets held abroad.
A. TRUE
B. FALSE

17) A current account deficit occurs when a country exports more goods and receives more
income from abroad than it imports and pays abroad.
A. TRUE
B. FALSE

18) One reason a home country may discourage foreign direct investment outflows is to protect
its "sunset" industries.
A. TRUE
B. FALSE

19) The ________ theory states that when an aspect of the market makes a transaction less
efficient than it could be, a company will undertake foreign direct investment to internalize the
transaction and thereby remove the efficiency-reducing aspect.
A) market power
B) eclectic
C) international product life cycle
D) market imperfections (sự không hoàn hảo của thị trường)

20) Which of the following theories states that firms undertake foreign direct investment, when
the features of a particular location combine with ownership and internalization advantages, to
make the location appealing for investment?
A) market power theory
B) international product life cycle theory
C) market imperfections theory
D) eclectic theory

4
Copyright © 2016 Pearson Education, Inc.
21 The ________ theory states that a firm tries to establish a dominant presence in an industry by
undertaking foreign direct investment.
A) eclectic
B) market power
C) market imperfections
D) international product life cycle

22) A company can achieve market power through ________.

A) ownership advantages
B) internalization advantages
C) horizontal integration
D) vertical integration

24) The extension of a company's activities into stages of production that absorb the company's
outputs is known as ________.
A) forward integration (tích hợp chuyển tiếp)
B) backward integration
C) an internalization advantage
D) an ownership advantage

25) Which of the following countries would a watchmaker most prefer to manufacture its
watches in, in order to capitalize on buyer perceptions of high quality?
A) China
B) Thailand
C) Mexico
D) Switzerland

26) A firm's subsidiary built abroad from the ground up is called a(n) ________.
A) greenfield investment
B) portfolio investment
C) distributive channel
D) shell corporation

27) Which of the following is a reason behind intervention by a host country on matters related
to FDI?
A) to keep their balance of payments under control (để giữ cho cán cân thanh toán của họ
được kiểm soát)
B) to protect their outdated technology and management skills
C) to strictly encourage the establishment of sunset industries
D) to decrease the country's competitiveness in the global market

28) ________ are those that use outdated and obsolete technologies or employ low-wage
workers with few skills.
A) Business-agile enterprises
B) Sunset industries
C) Greenfield investments
D) Shell corporations
5
Copyright © 2016 Pearson Education, Inc.
29) Ownership restrictions and performance demands are used by ________.
A) host countries to promote FDI
B) host countries to restrict FDI ( nước sở tại hạn chế FDI
C) home countries to promote FDI
D) home countries to restrict FDI

30) Home nations discourage foreign direct investment outflows because it ________.
A) discourages cooperation between countries
B) replaces jobs in the home nation ( thay thế các công việc trong nước)
C) fails to protect the "sunset" industries in the home nation
D) decreases long-term competitiveness of companies

31) A home country encourages outflows of foreign direct investment because it ________.
A) helps in replacing jobs at home
B) sends resources out of the home country
C) tends to increase the long-term competitiveness of firms (có xu hướng tăng khả năng
cạnh tranh dài hạn của các doanh nghiệp)
D) takes the place of all the exports and imports in the country

32) Which of the following methods is being used when a host country provides lower tax rates
and low-interest loans to firms from abroad for encouraging inflows of foreign direct
investment?
A) financial incentives (khuyến khích tài chính)
B) sanctions
C) local content requirements
D) embargoes

33) Tax breaks on profits earned abroad and political pressures are used by ________.
A) host countries to promote FDI
B) host countries to restrict FDI
C) home countries to promote FDI ( nước nhà để thúc đẩy)
D) home countries to restrict FDI

34) Which of the following is used by home-country governments to promote outbound foreign
direct investment?
A) political pressure (áp lực chính trị)
B) performance demands
C) ownership restrictions
D) sanctions

35) Which of the following is used by home country governments to limit outbound foreign
direct investment?
A) ownership restrictions
B) differential tax rates ( thuế suất chênh lệch)
C) tax breaks
D) low-interest loans
6
Copyright © 2016 Pearson Education, Inc.
 7
Copyright © 2016 Pearson Education, Inc.