When Is Decentralization of Manufacturing Facilities Most Appropriate

question 26

Multiple Choice

When is decentralization of manufacturing facilities most appropriate?

• A)when the product serves universal needs
• B)when exchange rates are expected to remain relatively stable
• C)when the product's value-to-weight ratio is high
• D)when there are few trade barriers
• E)when the production technology has low minimum efficient scale

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Definitions:

Expected Return

The predicted average of possible returns for an investment, accounting for the probability of each outcome and its associated return.

Risk-Adjusted Discount Rate

A discount rate that adjusts for the risk of the cash flows, giving a more accurate present value estimate.

Market Return

The total return on investment, including dividends and capital gains, from holding a market portfolio.

Nondiversifiable Risk

A type of risk that affects all investments across the market and cannot be eliminated through diversification.