Question

A purely domestic firm sources its products, sells its products, and raises its funds domestically
A. Can face stiff competition from a multinational corporation that can source its products in one country, sell them in several countries, and raise its funds in a third country.
B. Can be more competitive than a MNC on its home turf due to superior knowledge of the local market
C. Can still face exchange rate risk, just like a MNC
D. All of the above are true

Answer 1

Answer:

The correct answer is option D.

Explanation:

A purely domestic firm can face competition from an MNC. An MNC has the advantage of more than one sources of inputs and more than one product market. But the domestic firm also possesses an advantage of having a thorough knowledge of the local market as they have operated there unlike MNCs.  

The domestic even though operating in the domestic territories may still face foreign exchange risk. This is because their competitors may be operating internationally.