Multiple Choice Questions on Foreign Direct Investment (FDI)
1- Through Foreign Direct Investment a firm invests directly in facilities
(A) to produce a product in a foreign country
(B) to market a product in a foreign country
(C) both (A) and (B)
(D) none of the above
2- Once a firm undertakes FDI, it becomes a(an) ___ Enterprise.
(A) Multinational
(B) Independent
(C) Competitive
(D) None of the above
3- Which of the following is a form of FDI
(A) establishment a wholly new operation
(B) acquiring an existing firm
(C) merging with an existing firm
(D) all of the above
4- Minority interest refers to ___ interest in the company’s share capital and voting rights.
(A) less than 50%
(B) less than 60%
(C) less than 70%
(D) less than 80%
5- Foreign portfolio investment (FPI) is investment by ___ in foreign financial instruments.
(A) individuals
(B) firms
(C) public bodies
(D) any of the above
6- Green field investment means
(A) merging with an existing firm
(B) acquiring an existing firm
(C) establishment of a wholly new operation
(D) none of the above
7- FDI decisions are affected by the following factor(s):
(A) Government policy
(B) Political stability
(C) State of economic development
(D) All of the above
8- ___ FDI is the investment in the same industry abroad as the firm operates at home.
(A) Horizontal
(B) Vertical
(C) both (A) and (B)
(D) none of the above
9- In which of the following product, transportation costs have little impact on the relative attractiveness of exporting, licensing, and FDI.
(A) cement
(B) soft drinks
(C) electronic components
(D) all of the above
10- In which of the following product, transportation costs have higher impact on the relative attractiveness of exporting, licensing, and FDI.
(A) electronic components
(B) personal computers
(C) medical equipment
(D) soft drinks
11- Which of the following is Vertical FDI form?
(A) backward vertical FDI
(B) forward vertical FDI
(C) both (A) and (B)
(D) straight vertical FDI
12- ___ FDI will occur when a firm has the knowledge and the ability to extract raw materials in another country.
(A) Backward vertical
(B) Forward vertical
(C) both (A) and (B)
(D) None of the above
13- ___ is essentially the service industry version of licensing-although it normally involves much longer-term commitments than licensing.
(A) Dealership
(B) Franchising
(C) Joint venture
(D) None of the above
14- Following is(are) strong reason(s) why MNCs are welcomed to invest in foreign countries.
(A) Promotion of domestic investment
(B) To fill the gap between available domestic resources and the desired level of resources
(C) To fill the gap in management, entrepreneurship and technology
(D) All of the above
15- The main benefit(s) of FDI to host country is(are):
(A) Resource-transfer effects
(B) Balance-of-payments effect
(C) Effect on competition and economic growth
(D) All of the above
ANSWERS:
1-(C), 2-(A), 3-(D), 4-(A), 5-(D), 6-(C), 7-(D), 8-(A), 9-(C), 10-(D), 11-(C), 12-(A), 13-(B), 14-(D), 15-(D)