When a Multinational Affiliate Replicates Elements of a Production Process

question 54

Multiple Choice

When a multinational affiliate replicates elements of a production process in a foreign country it is called ________ foreign direct investment.

• A) vertical
• B) horizontal
• C) transitional
• D) bisectional
• E) direct

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Definitions:

Cross Elasticity

The extent to which the demand for a certain good alters in response to price changes of another good.

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increased demand for the other.

Income Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in consumers' income.

Demand Inelastic

When the quantity demanded of a good or service is relatively unchanged in response to price changes.