The Greatest Disadvantage of Operating a Wholly Owned Subsidiary Is

question 30

Multiple Choice

The greatest disadvantage of operating a wholly owned subsidiary is

• A)a loss of technology is likely to occur.
• B)quality levels are difficult to monitor overseas.
• C)high costs and risk are associated with this type of operation.
• D)overseas consumers are often resentful of foreigners.
• E)host countries can impose higher tariffs on the firm.

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Definitions:

Short Run

A period in which at least one input in the production process is fixed, limiting the ability of a firm to adjust to changes in market demand.

Long Run

An economic term referring to a period during which all factors of production and costs are variable, allowing for full adjustment to changes.

Fixed Cost

Costs that do not change with the level of output or sales, such as rent or salaries.

Variable Cost

Expenses that change in proportion to the amount of goods or services produced, like labor and materials.