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Two myths about multinationals
» Practice Questions
1. Some firms have higher market capitalization than a country’s economy. This leads some to conclude that these firms are more important economically. What is wrong with this thinking?
It doesn’t consider that some companies are not publically traded
It confuses stocks and flows
It doesn’t account for exchange rates between countries
2. Multinational firms are sometimes accused of “exploiting” workers in poorer countries. One reason these workers’ wages may be low is because:
there are too many of these firms, which allows them to collude and pay workers a wage
there are to only a few of these firms, which means firms do not have to compete to attract labor
either a. or b.