Answer to Question 1
Answer: A
Answer to Question 2
Because acquiring major productive assets such as land, plant, and equipment for FDI is costly and because FDI investments are usually undertaken for the long term, choosing the right market is critical, and different variables apply than for exporting. For example, compared to exporting, the availability of skilled labor and managerial talent in a country is relatively more important for FDI ventures. When seeking the best locations for FDI, researchers typically consider the following variables:
Long-term prospects for growth and substantial returns
Cost of doing business, based on the price and availability of commercial infrastructures, tax rates, wages, and worker productivity levels
Country risk, including regulatory, financial, political, and cultural barriers, and the effectiveness of intellectual property laws
Competitive environment and intensity of competition from other firms
Government incentives such as tax holidays, subsidized training, grants, or low interest loans
The researcher can access numerous sources of information for screening countries for FDI, such as the United Nations Conference on Trade and Development. Another is the consulting firm A. T. Kearney, which prepares the Foreign Direct Investment Confidence Index that tracks how political, economic, and regulatory changes affect the FDI intentions and preferences of the world's top 1,000 firms.
Answer to Question 3
Answer: C
Critical thinking and the assessent process
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