What Is One Reason for the Tremendous Increase in the Flow

question 15

Multiple Choice

What is one reason for the tremendous increase in the flow of foreign direct investment from 1982 to 2007?

• A)Transfer pricing
• B)The liberalization of investment laws in many countries
• C)The similarities in tax rates and tax laws across the globe
• D)The availability of hedging instruments

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Definitions:

Comparative Advantage

The ability of an entity to produce a good or offer a service at a lower opportunity cost than others, leading to more efficient trade.

Opportunity Cost

The value of the next best alternative forgone as a result of making a decision to pursue a certain action.

Absolute Advantage

The ability of an entity to produce more of a good or service with the same amount of resources, or the same amount of a good or service with fewer resources, than competitors.

Opportunity Cost

The cost associated with not pursuing an alternative option when a decision is made, reflecting the trade-offs inherent in decision-making.