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:

Binary Variable

A variable that takes on one of exactly two possible values, typically represented or coded as 0 and 1.

Processes

A series of actions or steps taken in order to achieve a particular end, often referring to sequences in manufacturing or computation.

Solver

A computational tool used in spreadsheet programs to find optimal solutions to complex decision-making problems by changing multiple variables.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.