ECO 410 Week 10 Quiz – Strayer



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Quiz 9 Chapter 17 and 18

Foreign Direct Investment and Political Risk

17.1   Sustaining and Transferring Competitive Advantage

Multiple Choice

1) An example of economies of scale in financing include:
A) being able to access the Euroequity, Eurobond, and Eurocurrency markets.
B) being able to ship product in shiploads or carloads.
C) being able to use large-scale plant and equipment.
D) all of the above





2) Which of the following is NOT a factor of Porter's "diamond of national advantage"?
A) factor conditions
B) demand conditions
C) related and supporting industries
D) All of the above are factors of the diamond of national advantage.





3) The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.
A) licensing
B) joint ventures
C) foreign direct investment
D) strategic alliances





4) The O in OLI refers to an advantage in a firm's home market that is:
A) operator independent.
B) owner-specific.
C) open-market.
D) official designation.




5) The owner-specific advantages of OLI must be:
A) firm-specific.
B) not easily copied.
C) transferable to foreign subsidiaries.
D) all of the above





6) A/An ________ would be an example of an owner-specific advantage for an MNE.
A) patent
B) economy of scale
C) economy of scope
D) all of the above





7) The L in OLI refers to an advantage in a firm's home market that is a:
A) liability in the domestic market.
B) location-specific advantage.
C) longevity in a particular market.
D) none of the above





8) A/An ________ would be an example of a location-specific advantage for an MNE.
A) patent
B) economy of scale
C) unique source of raw materials
D) possession of proprietary information






9) The I in OLI refers to an advantage in a firm's home market that is an:
A) internalization.
B) industry-specific advantage.
C) international abnormality.
D) none of the above




10) A/An ________ would be an example of an internalization advantage for an MNE.
A) patent
B) economy of scale
C) unique source of raw materials
D) possession of proprietary information





True/False

1) MNEs that are resident in liquid and unsegmented capital markets are more likely to be able to demonstrate financial strength by achieving and maintaining a global cost and availability of capital.





2) A strongly competitive home market tends to dull the competitive advantage relative to firms located in less competitive home markets.





3) The authors were unable to identify in lesser developed countries specific firms that are nearing the status of global MNE.






Essay

1) List and explain three strategic motives why firms become multinationals and give an example of each.



2) What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

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