To Fully Benefit from Economies of Scale, an MNC Should

question 43

Multiple Choice

To fully benefit from economies of scale, an MNC should:

• A)establish a subsidiary in a new market that can sell products produced elsewhere.
• B)establish a subsidiary in a market that has relatively low costs of labor or land.
• C)establish a subsidiary in a market where raw materials are cheap and accessible.
• D)participate in a joint venture in order to learn about a production process or other operations.

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Definitions:

Beta

A gauge for assessing the volatility or inherent risk in a security or portfolio against the broader market index.

Security Market Line

A graphical representation of the expected return of investments at different levels of risk as per the Capital Asset Pricing Model (CAPM).

Required Rates of Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put money into it, considering the risk.

Formulation

The process of devising or planning a strategy, policy, or system often based on specified principles or procedures.