Exercise 1. A)Multiple choice questions (only one correct answer exists).

A) Multiple choice questions (only one correct answer exists).

Q1: What is FDI? (p. 278)

(a) Existing businesses are sold and old facilities are purchased.

(b) Existing businesses are purchased or new facilities are built.

(c) Investments are financed by banks.

(d) Investments are financed by the governments.

Q2: The purpose of a portfolio investment is to... (p. 278)

(a) engage in a monetary transaction.

(b) get involved in investment.

(c) obtain a financial return on investment.

(d) obtain a material fund on equities.

Q3: According to neoclassical economists, a firm’s behaviour is determined by… (p. 279)

(a) the government.

(b) the rules of the government.

(c) priceless mechanisms.

(d) market forces.

Q4: From the perspective of neoclassical economists, trade and investment are … (p. 280)

(a) perfect substitutes.

(b) perfect complements.

(c) successful substitutes.

(d) successful complements.

Q5: According to Gilpin, MNCs are primarily … firms. (p. 280)

(a) monopolistic.

(b) oligopolistic.

(c) competitive.

(d) national.

Q6: The economist Paul Krugman is convinced that MNCs are not merely … for trade; in fact these corporations attempt to expand their … over foreign economies. (p. 281)

(a) complementaries, power

(b) substitutes, friendship

(c) substitutes, control

(d) complementaries, control

Q7: What is the correct order of stages in Vernon’s product cycle theory? (p. 282)

(a) innovation, maturity, growth, decline

(b) maturity, innovation, growth, decline

(c) decline, innovation, growth, maturity

(d) innovation, growth, maturity, decline

Q8: Which of the following factors has been emphasised in Dunning’s theory? (p. 283)

(a) product cycle

(b) technology

(c) power

(d) market concentration

Q9: What advantages do MNCs have according to Dunning? (p. 284)

(a) information, location and internationalisation

(b) ownership, location and internalisation

(c) ownership, location and internationalisation

(d) information, transformation and internationalisation

Q10: Which of the following concepts was developed by Porter? (p. 285)

(a) monopolistic competition

(b) ownership advantage

(c) value chain

(d) marketing store

Q11: According to the state-centric approach, under what circumstances could the rise and success of MNCs have been realised? (p. 288)

(a) favourable international political environment

(b) low cost production

(c) the reduction of transportation costs

(d) low comparative advantage of national corporations

Q12: According to the state-centric approach, what would happen if the major capitalist powers were to break down? (p. 288)

(a) the dominant role of MNCs would diminish

(b) the dominant role of MNCs would further increase

(c) MNCs would break down

(d) MNCs would go bankrupt

B) Please decide whether the following statements are correct or not.

Q1: Multinational companies are amongst the key features of the globalisation of the world economy. C

Q2: MNCs expand overseas primarily through banking loans and portfolio investments such as the purchase of governments bonds. I

Q3: Generally speaking, the purpose of FDI is to achieve a partial or total control over marketing, production and other facilities in a foreign country. C

Q4: MNCs usually pursue a national strategy. I

Q5: According to neoclassical economists, the nationality of an MNC strongly determines its strategy and operation. I

Q6: MNCs are mostly the product of market imperfections and unique corporate experiences. C

Q7: Tax breaks are often applied by national governments in order to attract foreign direct investment. C

Q8: MNCs are acknowledged as a means to reduce transaction costs. C

Q9: For Vernon, FDI is a means used by corporations to pre-empt foreign competition and to maintain monopoly rents. C

Q10: According to Porter, the real disadvantage of multinational companies over domestic ones is that MNCs cannot “tap into the value chain”. I

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