MNCs May Undertake Overseas Investment Projects in a Foreign Country

question 29

Multiple Choice

MNCs may undertake overseas investment projects in a foreign country, despite the fact that local firms may enjoy inherent advantages. This implies that

• A)MNCs are making a mistake in this case and will have to eventually withdraw.
• B)MNCs should have significant advantages over local firms such as comparative advantages due to intangible assets.
• C)the local firms will not have to compete due to their inherent advantages over the foreigners.
• D)none of the above

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Definitions:

Flexible Budget

A budget that adjusts or scales according to the volume of activity, providing a more useful tool for performance evaluation.

Direct Labor

Labor costs that are easily traced to or directly associated with specific products or services.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and loan payments.