A Firm Is More Likely to Engage in Horizontal Foreign

question 10

Multiple Choice

A firm is more likely to engage in horizontal foreign direct investment if

• A) trade costs are low and firms experience constant returns to scale in production.
• B) trade costs are low and there are internal economies of scale.
• C) trade costs are high and there are internal economies of scale.
• D) trade costs are high and there are external economies of scale.
• E) trade costs are low and there are external economies of scale.

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Definitions:

Product Market

The marketplace where final goods or services are offered to consumers, businesses, and other entities by producers and suppliers.

Resource Market

A market where resources (e.g., labor, capital, land) are bought and sold, often determining the distribution of income in an economy.

Imperfectly Competitive

Imperfectly Competitive describes markets where the assumptions of perfect competition, such as homogeneous products and many buyers and sellers, are not fully met, resulting in individual firms having some control over price.

Labor Demand Data

Information representing the quantity of labor that employers are willing and able to hire at different wage rates.