Question 1

By establishing transplant factories in the United States, Japanese automakers were able to avoid export restrictions imposed by the Japanese government, but not import restrictions imposed by the U.S.government.

Accepted Answer

By establishing transplant factories in the United States, Japanese automakers were able to avoid both export restrictions imposed by the Japanese government and import restrictions (such as tariffs and quotas) imposed by the U.S. government, as they were manufacturing cars locally in the U.S.

Question 2

Joint ventures lead to losses in national welfare when the newly established business adds to preexisting production capacity and fosters additional competition.

Accepted Answer

The statement is false. Joint ventures can lead to gains in national welfare if they result in increased efficiency and productivity. It is only when joint ventures lead to the creation of excess production capacity and increased competition that they may lead to losses in national welfare.

Question 3

Imagine that in 2017, the Ford Motor Company earned $521 million from its production operations in Mexico.Those earnings are then used to expand those same Mexican production operations.This is NOT an example of foreign direct investment.

Accepted Answer

The scenario described is an example of foreign direct investment.

Question 4

A joint venture leads to increases in national welfare if the cost-reduction effect is due to wage concessions and if it more than offsets the market-power effect.

Accepted Answer

The answer of A joint venture leads to increases in...

Question 5

International joint ventures tend to yield a welfare-increasing market-power effect and a welfare-decreasing cost-reduction effect.

Accepted Answer

International joint ventures can lead to a welfare-increasing cost-reduction effect due to shared resources and expertise, while the market-power effect, which can limit competition, might be welfare-decreasing.

Question 6

Mergers differ from joint ventures in that they involve the creation of a new business firm, rather than the union of two existing companies.

Accepted Answer

The given statement is incorrect. Joint ventures involve the creation of a new business entity, whereas mergers involve the combination of two or more existing companies to form a new entity.

Question 7

There is universal agreement on an exact definition of a multinational enterprise.

Accepted Answer

The statement is false as there is no universal agreement on an exact definition of a multinational enterprise.

Question 8

If a joint venture among competing firms is able to cut costs by extracting wage concessions from domestic workers, national welfare increases.

Accepted Answer

The premise of the statement is based on exploiting native workers, which could harm national welfare in the long run.

Question 9

Foreign-owned companies in the United States operate under more strict antitrust, environmental, and other regulations than U.S.-owned companies.

Accepted Answer

The statement is about foreign-owned companies in the United States, but Figure 9.3 represents the Mexican labor market, so it is not related to the question. The answer to the statement is false because foreign-owned companies in the United States must comply with the same regulations as U.S.-owned companies.

Question 10

Both economic theory and empirical studies support the notion that foreign direct investment is conducted in anticipation of future profits.

Accepted Answer

Economic theory suggests that firms invest in foreign countries with the expectation of earning higher profits in the future. Empirical studies have also found evidence supporting this idea.

Question 11

In natural-resource-oriented industries, such as oil and copper, joint ventures have often been formed by several companies since the cost of resource extraction may be prohibitively large for a particular company.

Accepted Answer

This statement is true and is relevant to the topic of the Mexican labor market. However, it is not directly related to the information presented in Figure 9.3.

Question 12

There is virtually universal agreement among economists that foreign direct investment in the United States has reduced the economic welfare of the average U.S.citizen.

Accepted Answer

The statement in the question is not related to the information presented in Figure 9.3. Additionally, the statement itself is not accurate and goes against the consensus among economists that foreign direct investment can have positive effects on economic welfare.

Question 13

Developing countries, such as China and India, have historically closed their borders to foreign companies unless they are willing to take on partner companies in developing countries.

Accepted Answer

Historically, countries like China and India have required foreign companies to form joint ventures with local firms as a way to protect domestic industries and ensure technology transfer.

Question 14

Joint ventures lead to national welfare gains if the newly established business yields productivity increases that would have been unavailable if each parent performed the same function separately.

Accepted Answer

Joint ventures can lead to productivity increases and technological advancements that may not have been possible if the parent companies worked independently. This can lead to national welfare gains as the economy becomes more efficient and competitive. Therefore, the statement is true.

Question 15

Multinational corporations often locate manufacturing operations abroad in order to take advantage of foreign resource endowments or wage scales.

Accepted Answer

This statement is true. Multinational corporations often locate manufacturing operations abroad in order to take advantage of foreign resource endowments or wage scales.

Question 16

A joint venture along two large competing companies tends to yield a market-power effect, which results in a reduction in consumer surplus that is not offset by a corresponding gain to producers.

Accepted Answer

The question asked for a true/false statement about the figure, but the provided text does not relate to the figure. Therefore, the correct answer cannot be determined.

Question 17

A joint venture leads to increases in national welfare if its cost-reduction effect is due to productivity gains and if it more than offsets the market-power effect.

Accepted Answer

This statement is a valid proposition on the conditions under which a joint venture can lead to increases in national welfare. If the cost-reduction effect is due to productivity gains (e.g., through the sharing of technology, research and development, or economies of scale), and if it more than offsets the market-power effect (e.g., by increasing competition, lowering prices, or improving quality), then a joint venture can improve economic efficiency and welfare. However, if the cost-reduction effect is due to collusion or other anticompetitive behaviors, or if the market-power effect dominates, then a joint venture can harm consumers and the economy.

Question 18

During the 1980s and 1990s, Japanese auto firms established manufacturing facilities in the United States known as "transplants."

Accepted Answer

Japanese auto firms, seeking to circumvent trade barriers and take advantage of the U.S. market, established manufacturing plants in the United States during the 1980s and 1990s. These facilities are often referred to as "transplants" and allowed these companies to build cars more economically while avoiding import restrictions.

Question 19

Conglomerate integration would occur if General Motors Inc.of the United States acquired a controlling interest in a British chemical company.

Accepted Answer

Conglomerate integration refers to the combination of firms that operate in unrelated business areas, so General Motors (an automotive company) acquiring a British chemical company (unrelated industry) exemplifies this.

Question 20

If the size of the Canadian market is large enough to permit efficient production in Canada, a U.S.firm would profit by establishing a Canadian manufacturing subsidiary or licensing rights to a Canadian firm to manufacture and sell its product in Canada.

Accepted Answer

The given statement is not related to the figure or information provided. Therefore, it cannot be answered based on the given information.

Quiz 9: International Factor Movements and Multinational Enterprises