Opportunity Cost of Attracting Industry

question 29

Essay

Opportunity Cost of Attracting Industry
The Itagi Computer Company From Japan is looking to build a factory for making CD-ROM's in the United States. The company is concerned about the safety and well-being of its employees and wants to locate in a community with good schools. The company also wants the factory to be profitable and is looking for subsidies from potential communities. Encouraging new business to create jobs for citizens is important for communities, especially communities with high unemployment.
Wellville has not been very well since the shoe factory left town. The city officials have been working on a deal with Itagi to get the company to locate in Wellville. Itagi officials have identified a 20 acre undeveloped site. The city has tentatively agreed to buy the site for $50,000 for Itagi and not require any payment of property taxes on the factory by Itagi for the first five years of operation. The property tax deal will save Itagi $3,000,000 in taxes over the five years. This deal was leaked to the local newspaper. The headlines the next day were: "Wellville Gives Away $3,000,000+ to Japanese Company".
Required:
a. Do the headlines accurately describe the deal with Itagi?
b. What are the relevant costs and benefits to the citizens of Wellville of making this deal?

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Definitions:

Valuable

Having considerable worth, importance, or usefulness.

Global Brand

A brand that is recognized and has a consistent image and product availability across the world markets.

International Brand

A brand that is marketed and recognized across several countries, often requiring adaptability to different cultures and markets.

Exported Brand

A brand that is marketed and sold outside of the country where it is produced.