Question 1.

5. One key difference between traditional economics and behavioral economics is

a)

b)

c)

d)

A. Traditional economics does not argue that markets are efficient while behavioral economics does.

B. Traditional economics argues that individuals act rationally when making decisions; behavioral economics argues that they often act on a relative, versus rational, basis. irrationally.

C. Behavioral economics argues that individuals act rationally when making decisions; traditional economics argues that they often act on a relative, versus rational, basis.

D. Behavioral economics focuses on absolute decisions; traditional economics focuses on relative decisions.

Question 2.

3. What would be some of the basic requirements for companies considering a foreign investment? (4 Marks,0.5 mark for basic idea, and additional 0.5 mark for complete idea)Hevision Date 25062015 Form No FCDACA/10901 Group Work Instructions 1) You are requested to join a student group; each group consists of 3-5 students. 2) Each group should work independently of the other groups. 3) This work should be submitted by the end of this lecture. Task: Read the following case study carefully then answer the three questions provided. Understanding Foreign Direct Investment (FDI) Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development. Foreign direct investment, in its classic definition, is defined as a company from one country making a physical investment into building a factory in another country. The direct investment in buildings, machinery and equipment is in contrast with making a portfolio investment, which is considered an indirect investment. In recent years, given rapid growth and change in global investment patterns, the definition has been broadened to include the acquisition of a lasting management interest in a company or enterprise outside the investing firm's home country. As such, i may take many forms, such as a direct acquisition of a foreign firm, construction of a facility, of investment in a joint venture or strategic alliance with a local firm with attendant input of technology licensing of intellectual property, in the past decade, FDI has come to play a major role in the internationalization of business. Reacting to changes in technology, growing liberalization of the national regulatory framework governing investment in enterprises, and changes in capital market profound changes have occurred in the size, scope and methods of FDI. New information technolog systems, decline in global communication costs have made management of foreign investments fi easier than in the past. The sea change in trade and investment policies and the regulatory environme globally in the past decade, including trade policy and tariff liberalization, easing of restrictions foreign investment and acquisition in many nations, and the deregulation and privatization of manOPPORTUNITY COST WORKSHEET 2 Below, you are provided Gerardo's Production Possibilities Frontier between biology homework and economics homework before and after he attends economics tutoring sessions. You will use this information to identify how a technological innovation that affects production of only one good alters the opportunity cost associated with producing both goods. PPF1 depicts Gerardo's PPF between biology homework and economics homework before he attends economics tutoring sessions. PPF2 depicts Gerardo's PPF between biology homework and economics homework after he attends economics tutoring sessions. 14 Economic Homework (in pages] 10 12 14 Minlazy Homework [in pages) Part 1: Before Gerardo attends economics tutoring sessions, what is his opportunity cost of producing an additional page of economics homework? Part 2: Before Gerardo attends economics tutoring sessions, what is his opportunity cost of producing an additional page of biology homework? * Part 3: After Gerardo attends economics tutoring sessions, what is his opportunity cost of producing an additional page of economics homework?Group Work industries, has probably been the most significant catalyst for FDI's expanded role. he most profound effect has been seen in developing countries, where yearly foreign direct investment flows have increased from an average of less than $10 billion in the 1970's to a yearly average of less than $20 billion in the 1980's, to explode in the 1990s from $26.7billion in 1990 to $179 billion in 1998 and $208 billion in 1999 and now comprise a large portion of global FDI.. Driven by mergers and acquisitions and internationalization of production in a range of industries, FDI into developed countries last year rose to $636 billion, from $481 billion in 1998 (Source: UNCTAD) Proponents of foreign investment point out that the exchange of investment flows benefits both the home country (the country from which the investment originates) and the host country (the destination of the investment). Opponents of FDI note that multinational conglomerates are able to wield great power over smaller and weaker economies and can drive out much local competition. The truth lies somewhere in the middle.For small and medium sized companies, FDI represents an opportunity to become more actively involved in international business activities. In the past 15 years, the classic definition of FDI as noted above has changed considerably. This notion of a change in the classic definition, however, must be kept in the proper context. Very clearly, over 2/3 of direct foreign investment is still made in the form of fixtures, machinery, equipment and buildings. Moreover, larger multinational corporations and conglomerates still make the overwhelming percentage of FDI. But, with the advent of the Internet, the increasing role of technology, loosening of direct investment restrictions in many markets and decreasing communication costs means that newer, non-traditional forms of investment will play an important role in the future. Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact. Monitoring this data is very helpful in trying to determine the impact of such investments on the overall economy but is especially helpful in evaluating industry segments. State and local governments watch closely because they want to track their foreign investment attraction programs for successful outcomes. According to the above paragraph answer the following questions, as a group consist of five students. www.oecd.org - global foreign investment trends, country investment guides, investment reviews, analysis www.columbia.edu/cu/libraries/indiv/business/guides/fordinv.html - a wide range of links to statistical information on global foreign direct investment.1.Define the term FDL (2 Marks, 1 mark for basic idea, and additional 1 marks for complete idea) 2.Why is FDI important for any consideration of going global? (4 Marks,0.5 mark for basic idea, and additional 0.5 mark for complete idea)