To use foreign factors of production, an MNC should:
A) establish a subsidiary in a new market that can sell products produced elsewhere.
B) establish a subsidiary in a market that has relatively low costs of labor or land.
C) establish a subsidiary in a market where raw materials are cheap and accessible.
D) participate in a joint venture in order to learn about a production process or other operations.

Question

Quizplus · Accepted Answer

Establishing a subsidiary in a market that has relatively low costs of labor or land would be the best option for an MNC to use foreign factors of production, as this would allow them to take advantage of the cost savings associated with using foreign labor or land. Establishing a subsidiary in a new market that can sell products produced elsewhere may not be the best option as there may be barriers to trade between countries. Establishing a subsidiary in a market where raw materials are cheap and accessible may be beneficial for some MNCs, but not all MNCs require raw materials as a factor of production. Participating in a joint venture may be helpful for some MNCs, but it may not necessarily provide access to the foreign factors of production that the MNC requires.

To Use Foreign Factors of Production, an MNC Should