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:

Concentration Ratio

A measure used to evaluate the extent of market control held by the largest firms within an industry.

Antitrust Laws

Legislation designed to promote fair competition for the benefit of consumers, by preventing monopolies and promoting business practices that encourage competition.

Price-fixing

An illegal agreement among competitors to set prices, limit supply, or engage in other activities to maintain high prices and restrict competition.

Vertical Mergers

Mergers between companies at different stages of production within the same industry, aimed at increasing efficiency or control over the supply chain.