If a US Parent Is Shipping Inventory to Its Mexican Subsidiary at Subsidiary

question 38

Multiple Choice

If a U.S. parent is shipping inventory to its Mexican subsidiary at an arbitrarily low transfer price,

• A) the U.S. parent will show a higher pre-tax profit.
• B) the Mexican government will collect relatively higher income taxes.
• C) the Mexican government will collect relatively high import tariffs.
• D) the Mexican subsidiary will show relatively lower profits.

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Definitions:

Ethical Leadership

The practice of leading by example in a way that is considered morally right, promoting an ethical culture within an organization.

Moral Development

The growth, progress, or continuous improvement in one's understanding of right and wrong or in developing ethical behavior.

Personal Needs

Requirements or desires of individuals essential for their well-being or personal satisfaction.

Ethical Leadership

A leadership style characterized by guiding followers in a manner that is moral and values-driven.