Which of the following provides a good explanation of why multinational firms exist?
A. Internalization advantages that favor direct investment over contracting with independent foreign firms
B. The need to shift financial capital between countries
C. Firms lack inherent knowledge of foreign laws, procedures, and practices.
D. Location factors that favor exporting over foreign production
Answer: A
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Globalization refers to a process involving many complex elements, one of which is that
a. the time it takes for goods, people, information, and money to flow across borders is expanding. b. lower transportation costs mean cheap labor in distant places can be exploited. c. the world is increasingly defined by separate markets rather than one dominant market. d. international trade decreases relative to domestic trade.
Once the marginal product of capital is equal to the real rental cost of capital ________
A) inventories will stabilize B) depreciation will equal the marginal rate of substitution C) the economy will reach full employment D) a profit-seeking firm will stop acquiring capital