Due to Transfer-Pricing Problems, Multinational Corporations Must Shift Profits Away

question 67

True/False

Due to transfer-pricing problems, multinational corporations must shift profits away from countries with low corporate tax rates to high tax-rate countries, thus absorbing a larger tax bite.

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Definitions:

External Cost

Costs of a transaction or activity that affect people other than those directly involved in the transaction, often not reflected in the market prices.

Social Cost

The total cost to society of an action, including both private costs borne by individuals and external costs absorbed by others.

Gallon

A unit of volume for liquid measure equal to four quarts, used in the United States and the United Kingdom.

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market price.