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:

Reality Principle

The psychological concept that represents the ability of the mind to assess the external world and act upon it accordingly, as opposed to acting on the pleasure principle.

Erogenous Zones

Areas of the body especially sensitive to sexual stimulation.

Psychosexual Stages

A theory proposed by Freud that child development occurs in five stages (oral, anal, phallic, latency, genital) each associated with pleasure in different parts of the body.

Projective Tests

Psychological assessments that involve presenting individuals with ambiguous stimuli and interpreting their responses based on the projection of their subconscious thoughts and feelings.