According to the Gravity Model, a Characteristic That Tends to Affect

question 3

Multiple Choice

According to the gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is

• A) their cultural affinity.
• B) the average weight/value of their traded goods.
• C) their colonial-historical ties.
• D) the distance between them.
• E) the number of different product varieties produced by their industries.

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Definitions:

Negotiated Price Approach

An approach to transfer pricing that allows managers of decentralized units to agree (negotiate) among themselves as to the transfer price.

Transfer Price

The price at which divisions of a company transact with each other, such as the sale of goods or services, often used for budgeting and tax purposes.

Decentralization

The process of distributing or dispersing functions, powers, people, or things away from a central location or authority.

Operating Costs

Expenses associated with the day-to-day operations of a business, excluding the cost of raw materials and direct labor.