CH 8 - Multinational Corporations In The Global Economy

Question 1

Foreign Direct Investment

Answer 1

A form of cross-border investment in which a resident or corporation based in one country owns a productive asset located in a second country.

Question 2

Locational advantage

Answer 2

Country characteristics (factor, natural resources, or market sizes) that create incentives for a foreign corporation to invest in the country

Question 3

Natural-resource investment

Answer 3

• a type of FDI by a foreign firm in a local economy made in order to gain access to the local economy’s natural resources

Question 4

Market-oriented investment

Answer 4

A type of FDI by a foreign firm in the local economy in order to gain access to consumers (the market) within the host country

Question 5

Efficiency-oriented investment

Answer 5

A type of FDI by a foreign firm in the local economy in order to use the locally abundant factor in production oriented toward the global market

Question 6

Horizontal integration

Answer 6

A form of industrial organization that occurs when a corporation creates multiple production facilities, each of which produces the same good or goods.

Question 7

Intangible asset

Answer 7

Something whose value is derived from knowledge or from skills or production processed of a firm

Question 8

Vertical integration

Answer 8

A form of industrial organization in which a single firm controls the different stages of the production process, rather than relying on the market to acquire inputs and sell outputs

Question 9

Specific asset

Answer 9

An investment dedicated to a particular economic use or particular long-term economic relationship

Question 10

Externality

Answer 10

Market failures that arise when the parties to a given transaction do not bear the full cost of or realize the full benefit from their transaction.