When a Wholly Owned Subsidiary Is Established in a Foreign

question 24

True/False

When a wholly owned subsidiary is established in a foreign country, the parent company, which remains in the United States, gives up ownership, authority, and control of over all phases of the operation in the foreign country.

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Definitions:

Economies of Scale

Describes the cost benefits that companies achieve through their operation size, where the cost for each unit produced typically falls as the scale of operation grows.

Constant Marginal Cost

A situation in which the cost of producing one additional unit of a product remains the same, regardless of the volume produced.

Average Fixed Cost

The cost that a company incurs for fixed resources divided by the quantity of output produced.

Diminishing Marginal Returns

A principle in economics where each additional unit of input results in a smaller increase in output after a certain point.