Scenario: Blickinstock at the Crossroads

question 21

Multiple Choice

Scenario: Blickinstock at the Crossroads
Auto parts supplier, Blickinstock Ltd., would like to expand its presence in Latin America. To that end, Blickinstock is trying to decide whether to purchase an existing company in a remote region of Argentina or build its own subsidiary. Keith Moon, Blickinstock's vice president of global business development, will be making a presentation to the board outlining the company's options.
-If board members ask about the maquiladora industry,Keith would explain that it refers to ________.

• A) Mexico's low-cost labor union
• B) the cross-border drug trafficking problem that threatens to limit legitimate production in Mexico
• C) the low-wage, 130-mile-wide strip along the U.S.-Mexico border that comprises a special economic region
• D) Latin America's new model for business that restricts foreign investors to take advantage of government incentives

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Definitions:

Normal Profit

The profit level that allows a business to cover its costs, including the opportunity cost of capital, without making an economic profit.

Economic Cost

The total cost of choosing one action over another, including both explicit costs (direct payments) and implicit costs (opportunity costs).

Uninsurable Risks

Risks that are too unpredictable or certain to occur, making it impossible for insurance companies to accurately price or offer coverage.

Nominal Rate of Interest

The rate of interest before adjustments for inflation, reflecting the market rate at which money can be borrowed.