PreFab, a clothing company is selling its goods in the country of Irmana. The clothing is manufactured in PreFab's home country and a tax is levied on it by the government of Irmana. This form of business is an example of _____.

Question

Quizplus · Accepted Answer

The scenario described in the question is an example of exporting, which is the sale of goods or services produced in one country to another country. This is because PreFab is manufacturing the clothing in their home country and selling it in Irmana, without setting up any physical presence in Irmana. The tax levied by the Irmana government is a form of trade barrier, but it doesn't fit the definition of protectionism, which refers to government policies that restrict international trade in order to protect domestic industries from foreign competition. Direct foreign investment involves setting up a physical presence, such as a subsidiary or branch, in a foreign country, while licensing involves giving another company the right to use your intellectual property in exchange for a fee or royalty.

PreFab, a Clothing Company Is Selling Its Goods in the Country