Assume that a Gucci handbag sells for $60 in Italy and $240 in the United States because Gucci must add the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price. This information indicates that Gucci faces a ________ problem.
A) dumping
B) tariff
C) licensing
D) product adaptation
E) price escalation

Question

Quizplus · Accepted Answer

The price difference between Italy and the United States suggests that Gucci faces a price escalation problem. This is because the cost of transporting the product, tariffs, and profit margins needed to sell the bag in the United States is significantly higher than in Italy, leading to a higher retail price in the US.

Assume That a Gucci Handbag Sells for $60 in Italy