Test Bank For International Economics 14th Edition by Robert Carbaugh

MULTIPLE CHOICE

1.”Risk spreading” is a motive most likely to be served when firms undergo:

a.

Horizontal integration

b.

Vertical integration

c.

Conglomerate integration

d.

None of the above

ANS:CPTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: Motives for Foreign Direct Investment

KEY: @2

2.The source (home) location of most of the world’s leading multinational enterprises is:

a.

North America and Europe

b.

North America and Asia

c.

Europe and South America

d.

Europe and Asia

ANS:APTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @1

3.Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods?

a.

Forward vertical integration

b.

Backward vertical integration

c.

Forward horizontal integration

d.

Backward horizontal integration

ANS:BPTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @1

4.Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles. This practice is referred to as:

a.

Forward vertical integration

b.

Forward conglomerate integration

c.

Backward vertical integration

d.

Backward conglomerate integration

ANS:APTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @2

5.Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel. This practice is referred to as:

a.

Conglomerate integration

b.

Forward vertical integration

c.

Backward vertical integration

d.

Horizontal integration

ANS:DPTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @2

6.During the 1970s, American oil companies acquired nonenergy companies (e.g., copper, auto components) in response to anticipated decreases in investment opportunities in oil. This type of diversification is referred to as:

a.

Horizontal integration

b.

Conglomerate integration

c.

Forward vertical integration

d.

Backward vertical integration

ANS:BPTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @2

7.Which of the following best refers to the outright construction or purchase abroad of productive facilities, such as manufacturing plants, by domestic residents?

a.

Direct investment

b.

Portfolio investment

c.

Short-term capital investment

d.

Long-term capital investment

ANS:APTS:1DIF:Moderate

NAT: BPROG: Reflective Thinking TOP: The Multinational Enterprise

KEY: @2

8.In recent years, the largest amount of U.S. direct investment abroad has occurred in:

a.

Central America

b.

South America

c.

Europe

d.

Japan

ANS:CPTS:1DIF:Easy

NAT: BPROG: Reflective Thinking TOP: Motives for Foreign Direct Investment

KEY: @1

9.In recent years, most foreign direct investment in the United States has come from:

a.

Western Europe

b.

Central America

c.

South America

d.

Asia

ANS:APTS:1DIF:Easy

NAT: BPROG: Reflective Thinking TOP: Motives for Foreign Direct Investment

KEY: @1

10.Most U.S. direct investment abroad occurs in:

a.

Communications

b.

Petroleum

c.

Finance and insurance

d.

Manufacturing

ANS:DPTS:1DIF:Easy

NAT: BPROG: Reflective Thinking TOP: Motives for Foreign Direct Investment

KEY: @1