Which of the following is a "trade cost" that firms need to consider when making offshoring decisions?
A) higher prices of utilities (electricity, fuel) in other countries
B) higher costs of construction of a plant in other countries
C) higher costs associated with poor communication and transportation
D) lower wages paid to low-skilled workers

Question

Quizplus · Accepted Answer

Higher costs associated with poor communication and transportation are an example of trade costs that firms need to consider when making offshoring decisions. These costs can arise due to differences in language or time zones, lack of reliable infrastructure, and transportation costs. Higher prices of utilities and higher costs of construction of a plant are examples of fixed costs that may be amortized over a longer period of time. Lower wages paid to low-skilled workers are an example of a potential benefit of offshoring, rather than a cost.

Which of the Following Is a "Trade Cost" That Firms