Gov Intervention To Promote Competition

• What does FDI stand for?

  Foreign Direct Investment
• What is the definition of FDI?

  Flow of capital for lasting interest in foreign enterprise
• How does currency depreciation affect FDI?

  It makes a country more internationally competitive
• What is a potential consequence of currency depreciation on FDI?

  It is likely to attract more FDI
• What are the measures to control TNC operations?

  • Political influence
  • Legal control
  • Self-regulation
• What is one way to regulate TNC activities?

  Through political influence
• How can regulation raise costs for firms?

  Firms face heavy fines for non-compliance
• Why might smaller countries hesitate to control TNCs?

  They fear losing a source of FDI
• Why is legal control more effective in developed economies?

  Less corruption allows for greater influence
• What might a government set standards for in relation to TNCs?

  Labour rights and working conditions
• What is self-regulation in the context of TNCs?

  Firms monitor their own ethical and legal behavior
• Why might firms choose to act ethically in the short run?

  To preserve a good public reputation
• What is a limitation of self-regulation?

  Firms may hide unethical behavior
• In which context is self-regulation likely to be more effective?

  Where enforcement mechanisms are weak
• Why might developing countries be unwilling to regulate TNCs?

  They see benefits in leaving firms unregulated
• What do the OECD Guidelines encourage firms to do?

  Adhere to human rights and environmental principles
• How can self-regulation lead to more efficient policy making?

  Firms use their knowledge to control behavior
• What could happen to standards of human rights and environmental conduct?

  They could become norms in the business environment
• What is a potential downside of firms adhering to global standards?

  They might lose competitiveness in the market
• What is the ultimate goal of a firm regarding profits?

  To maximize their profits
• What could make self-regulation ineffective?

  Lack of economic incentives to adhere to standards
• What is international competitiveness?

  Ability to compete successfully overseas
• What are the two types of competitiveness countries can use?

  Price and non-price competitiveness
• How can quality affect a country's competitiveness?

  Higher quality can justify higher prices
• What does unit labour cost measure?

  Labour cost per unit of output
• How do lower relative unit labour costs affect competitiveness?

  They increase competitiveness in manufacturing
• Which countries are known for lower labour costs?

  China, India, and Bangladesh
• What is product differentiation?

  Making a product distinct from competitors
• What is the significance of German cars in terms of competitiveness?

  They are known for their high quality
• How does productivity relate to unit labour costs?

  Higher productivity lowers unit labour costs
• What does relative export prices indicate?

  One country's export prices compared to another
• How does a lower relative export price affect competitiveness?

  It increases a country's competitiveness
• What is FDI?

  Foreign Direct Investment
• How does attracting FDI influence a country's economy?

  It increases productive capacity and growth
• Why are entrepreneurs important for competitiveness?

  They stimulate innovation and new ideas
• How does attracting skilled labor from abroad help a country?

  It fills skills gaps and improves quality
• What factors influence the UK's ability to attract FDI?

  Skills, flexibility, tax rates, and stability
• What happens to unit labour costs when wages rise faster than productivity?

  Unit labour costs increase
• What is the main role of the Competition and Markets Authority (CMA) in the UK?

  To regulate competition
• How does China's population affect its wages?

  Wages are generally low due to population size