Determine whether the following statements are TRUE, FALSE or UNCERTAIN, and jus

Question

Determine whether the following statements are TRUE, FALSE or UNCERTAIN, and justify your answer in one or two paragraphs. Select only 5 among 8 questions to answer. If you answer more than 5, only randomly chosen 5 will be graded 1. In horizontal models of multinational activity, foreign direct investment flows between neighboring countries are particularly appealing 2. In models of trade with monopolistic competition, consumers gain access to an overall larger number of varieties, but may end up with a lower number of domestically produced (or local) varieties.

Explanation / Answer

Ans 1= FALSE. Horizontal Foreign direct investment is based on the replication of the similar operations despite the location of the nations & vertical Foreign Direct Investment is based on the phases of manufacturing regardless of location of nation.

Ans 2=uncertain ,the amount of variety post trade will rise as an outcome of trade, but the amount of domestic variety will decline when there is a pro-competitive impact on the prices. If price level lessens as an outcome of trade the amount of domestic varieties will lessen. But, when there isn’t any downward pressure on the price level (when the mark-up doesn’t reduce) then producers won’t exit & the amount of domestic variety won’t fall.

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