The Costs of Production May Be Lowered If a Firm

question 37

Multiple Choice

The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because

• A) wages and other overheads may be higher in an FTZ.
• B) locally produced components do not qualify for tariffs.
• C) unassembled goods may qualify for lower freight rates.
• D) the finished goods cannot be exported to other countries.
• E) goods imported in an FTZ qualify for the same level of tariffs as other imported goods.

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Definitions:

Marginal Revenue Product

Marginal Revenue Product measures the additional revenue generated by employing one more unit of a factor of production, such as labor or capital.

Competitive Firm

A company that operates in a market with many buyers and sellers, where it has little control over market price.

Competitive Labor Market

A labor market scenario where numerous firms actively seek to hire from a large pool of available workers, with wage rates determined by supply and demand.

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor that workers are willing to offer and the wage rate, holding all other factors constant.