If Two Countries Had Completely Free Trade with Each Other,why

question 49

Multiple Choice

If two countries had completely free trade with each other,why might a multinational corporation still be created such that it holds factories in both countries?

• A)The multinational corporation wants to gain access to markets to which it would not otherwise have access.
• B)Multinational corporations generally receive better treatment abroad than in their home countries.
• C)Both countries have similar regulatory burdens.
• D)The multinational corporation wants access to cheaper labor in one of the countries.

---

Definitions:

Competitive Equilibrium

A situation in a market where the demand for goods equals the supply of goods, resulting in an equilibrium price and quantity that clears the market.

Utility Function

A function that captures the level of satisfaction or happiness that consumers derive from consuming various combinations of goods and services.

Initial Allocation

The initial distribution of goods, resources, or entitlements among individuals or groups before any trade or market exchange occurs.

Contract Curve

In economics, it is a curve that shows the set of mutually beneficial (efficient) allocations in a trade or exchange situation.