Exam (elaborations) MBA MKT640

MBA MKT 640 / MKT640 VERNONS PRODUCT LIFE-CYCLE THEORIES OF FDI Question 1 According to a recent UN survey, the world FDI stock grew at what rate relative to worldwide exports of goods and services? The world FDI stock grew at the same rate as worldwide exports of goods and services. The world FDI stock grew twice as fast as worldwide exports of goods and services. The world FDI stock grew half as fast as worldwide exports of goods and services. None of the above Question 2 The third most important host country for FDI is: China The United States Mexico Japan Question 3 Which of the following statements is true about product life cycle theory? It predicts that over time the U.S. switches from an exporting country of new products to an importing country The theory was developed in the 1960s when the U.S. was the leader in R&D. The international system of production is becoming too complicated to be explained by a simple version of the product life cycle theory All of the above Question 4 MNCs have invested in China: By lower labor costs. By a desire to preempt the entry of rivals into China’s potentially huge market. By lower material costs. All of the above Question 5 International markets for goods and services are often imperfect. Which is the MOST common and MOST important? Lack of knowledge Acts of governments Natural barriers like distance Cultural barriers Question 1 According to a recent UN survey, the world FDI stock grew at what rate relative to worldwide exports of goods and services? The world FDI stock grew half as fast as worldwide exports of goods and services. The world FDI stock grew twice as fast as worldwide exports of goods and services. The world FDI stock grew at the same rate as worldwide exports of goods and services. None of the above Question 2 Why do firms locate production overseas rather than exporting finished goods? Shipping costs All of the above Imperfect factor markets Firms seek to extend corporate control overseas Question 3 Which of the following statements is true about product life cycle theory? It predicts that over time the U.S. switches from an exporting country of new products to an importing country In the early stages of the product life cycle, the demand for the new product is relatively insensitive to the price and thus a pioneering firm can charge a relatively high price It has an “S” shaped curve when plotting “quantity sold” versus “time” All of the above Question 4 While there is no comprehensive theory of FDI, many existing theories emphasize: Imperfections in labor markets Imperfections in product markets Imperfections in capital markets All of the above Question 5 FDI can take the form of: Establishing new production facilities in a foreign country All of the above Greenfield investment Cross-border M&A Question 6 Why do governments regulate international trade? Pursue other economic objectives To raise revenue Protect domestic industries All of the above Question 7 International markets for goods and services are often imperfect. Which is the MOST common and MOST important? Natural barriers like distance Lack of knowledge Cultural barriers Acts of governments Question 8 The dominant source of FDI outflows: Several developed countries A few underdeveloped countries next to wealthy neighbors, like Mexico Africa and China None of the above