The best means of using direct foreign investment (DFI) to fully benefit from cheap foreign factors of production is probably to:
A) acquire a competitor that has controlled its local market.
B) establish a subsidiary in a new market that can sell products produced elsewhere; this allows for increased production and possibly greater production efficiency.
C) establish a subsidiary in a market that has relatively low costs of labor and land; sell the finished product to countries where the cost of production is higher.
D) establish a subsidiary in a market in which raw materials are cheap and accessible; sell the finished product to countries in which the raw materials are more expensive.

Question

Quizplus · Accepted Answer

By establishing a subsidiary in a market with relatively low costs of labor and land, a company can take advantage of cheaper factors of production. By selling the finished product to countries where production costs are higher, the company can increase its profits. This strategy is commonly known as export-oriented foreign direct investment. Acquiring a competitor or establishing a subsidiary in a market with cheap raw materials may not fully capture the benefits of cheap foreign factors of production. Establishing a subsidiary in a new market to sell products produced elsewhere may not fully take advantage of the cheap foreign factors of production.

The Best Means of Using Direct Foreign Investment (DFI) to Fully