b. Coca-Cola, an American multinational corporation, constructs a bottling plant in Malaysia.
c. An Iranian steel producer purchases an iron ore mine in the western Great Lakes region of the United States.
d. Fiat, an Italian automaker, buys Ford Motor Company.
ANSWER: c
121. Which of the following is a reason that a Chinese pork-producing firm recently acquired Smithfield Foods (an American pork-processing firm)?
a. The Chinese firm wanted to use its pork-processing techniques to improve Smithfield's pork-processing techniques.
b. The Chinese firm's acquisition would help it satisfy a growing demand for pork in China.
c. The Chinese firm wanted to take advantage of lower wages in the United States.
d. The Chinese firm wanted to monopolize the U.S. pork-producing industry.
ANSWER: b
122. Which of the following is a reason that the Japanese truck manufacturer Toyota might want to acquire or construct a plant in the United States?
a. By having a plant in the United States, Toyota avoids the U.S. 25% tariff on imported pickup trucks.
b. Toyota wants to take advantage of lower wages in the United States.
c. U.S. consumers will buy only U.S.-made pickup trucks.
d. Toyota wants to learn U.S. truck manufacturing technology.
ANSWER: a
123. A Chinese company, Fuyao Glass Industry Group, redesigned a shuttered General Motors plant in Dayton, Ohio, as a production facility. Despite having to pay higher wages in America, this business was able to become profitable for all of the following reasons EXCEPT:
a. it achieved higher levels of productivity.
b. the worker union reduced worker protections for additional health benefits.
c. robots were introduced to perform certain manual tasks.
d. entry-level wages were reduced in the American automobile industry.
ANSWER: b
124. Which of the following is NOT a reason for a firm to engage in horizontal FDI?
a. It may want to expand its business across international borders.
b. It may want to avoid tariffs in its foreign markets.
c. It may want to avoid tariffs in its home market.
d. It may want to reduce its corporate taxes.
ANSWER: c
125. Reasons that firms in an industrial nation acquire firms in another industrial nation do NOT include:
a. avoidance of import tariffs and quotas in the other nation.
b. the ability to acquire technology and resources from the other nation.
c. access to the other nation's market.
d. avoidance of export taxes in the other nation.
ANSWER: d
126. Which of the following is an example of reverse-vertical FDI?
a. Geely—a Chinese automaker—buys Volvo from Ford Motor Company.
b. Toyota—a Japanese automaker—constructs a truck manufacturing plant in Texas.
c. Chevron—an American petroleum firm—acquires a British petroleum firm.
d. General Motors—an American auto manufacturer—builds a plant in China to supply Buicks to the Chinese market.
ANSWER: a
127. Which of the following statements is an example of vertical FDI?
a. An American company purchases a British soccer team.
b. Ford Motor Company establishes a plant in Canada.
c. GM opens a plant in India.
d. BMW opens a plant in Bilbao, Spain.
ANSWER: c
128. __________ foreign direct investment occurs when a firm from an industrial country owns a plant in a developing country.
a. Vertical
b. Horizontal
c. Industrial
d. Reverse-vertical
ANSWER: a
129. In 2018, which of the following regions received the most FDI?
a. Europe
b. Canada
c. Latin America
d. China
ANSWER: a
130. With which country or region does most U.S. foreign direct investment occur?
a. China
b. Japan
c. Europe
d. Latin America
ANSWER: c
131. FDI flows into the United States and Europe are: