Which of the Following Is True About FDI

question 20

Multiple Choice

Which of the following is true about FDI?

• A) A focal firm makes minimum resource commitment as domestic firms take most of the financial responsibilities.
• B) A focal firm establishes a relatively permanent base in the foreign market, which increases flexibility for market and company conditions.
• C) A focal firm attains decreased risk due to the certainty in the foreign business environment.
• D) A focal firm attains maximum control by establishing a physical presence in the foreign market.

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Definitions:

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often leading to a net societal welfare loss.

Side Effects

Unintended consequences or secondary effects resulting from an action or decision, often seen in medicine, economics, and environmental policy.

Nonmarket Participants

Individuals or entities that engage in economic activities outside the formal market, often not reflected in formal economic statistics or analyses.

Externality

An outcome from economic action that affects people who are not directly involved, and this impact can be beneficial or harmful.