A U.S.firm plans to shift from exporting to production in China to serve the Chinese market.Which of the following statements would best explain this decision?
A)China's currency is appreciating relative to the U.S. dollar.
B)The firm is nearing capacity utilization in its U.S. plant.
C)The company need not alter its products for the Chinese market.
D)Transportation costs have become low relative to production costs.

Question

Quizplus · Accepted Answer

The fact that the firm is nearing capacity utilization in its U.S. plant suggests that it may be more cost-effective for the company to produce in China to serve the Chinese market rather than continue exporting to China. The other options do not provide a good explanation for why the firm would shift to production in China.

A USFirm Plans to Shift from Exporting to Production in China