Peterson Manufacturing Wants to Import a Machine from Germany

question 16

Multiple Choice

Peterson Manufacturing wants to import a machine from Germany. However, the company's head of manufacturing is reluctant to spend the time required to obtain a letter of credit that the German exporter insists on. You are the company's CFO. What advantage of a letter of credit will help convince the head of manufacturing that this is worthwhile?

• A) The importer does not have to pay for the merchandise until the documents have arrived.
• B) Obtaining pre-export financing becomes easier.
• C) It helps the importer to get goods for a lower price.
• D) It results in lower shipping costs.
• E) The importer does not have to pay the third party a fee for facilitating the transaction.

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Definitions:

Market System

The economy operates under a system where investment decisions, production processes, and distribution plans are shaped by the principles of supply and demand, and the open market is where prices for goods and services are freely established.

Allocation Of Resources

The process of assigning available resources, or inputs, to specific uses chosen among many possible and competing alternatives in order to achieve goals.

Income Distribution

The manner in which a nation’s total earnings are divided among its population, affecting economic equality.

Self-Interest

The motivation driving individuals to pursue their own advantages or benefits, often used in economic contexts to explain rational behavior.