The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin)adds more than it should to the U.S.trade deficit with China because
A) Chinese assembly labor represents only 47 % of the wholesale cost
B) the iPad's popularity has triggered an enormous number of unit sales
C) wholesale prices only count in the trade statistics if final product prices are higher
D) as with foreign-assembled minivans,most of the subassembly components come from the U.S.
E) the Chinese yuan is a managed currency

Question

Quizplus · Accepted Answer

The correct answer is D because the trade deficit calculation can be misleading when a significant portion of the product's components are actually sourced from the U.S. This means that while the final assembly occurs in China, contributing to the trade deficit, much of the value of the product (through its components) originates from the U.S., thus overstating the actual deficit with China.

The Import of Apple IPads Assembled in Shanghai at a $295