Chapter 7.2, Problem 1QS2

Summary Introduction

To Determine:

Imperfections that are relevant to the discussion of market imperfections theory.

Introduction:

Market imperfection theory states that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection. It arises from international markets when perfect competition doesn’t exist.