Which of the following best describes a characteristic of ho

Which of the following best describes a characteristic of horizontal FDI? A. trade and transport costs play a much more important role than production cost differences B. behind the large increase in FDI inflows to developing countries C. production cost differences are an outcome of the theory of comparative advantage D the production chain is broken up, and parts of the production processes are transferred to the affiliate location ? ?

Solution

Horizontal FDI are those firms which produce same goods and services in multiple plants in different countries. Two pivotal factors being trade costs and firm-level scale economies. These firms avoid transportation costs and concentrate on getting access to the local markets of the foreign countries. This concept relies on countries with similarities can exhibit multinational activities. Production cost difference is the main outcome which determines whether it is viable to establish foreign production in a country.

the correct option is (c)