In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur ____ fixed production costs and ____ transportation costs than DFI.
A) higher; higher
B) higher; lower
C) lower; lower
D) lower; higher

Question

Quizplus · Accepted Answer

Exporting often involves lower fixed production costs since the same production process can be used to manufacture both domestic and international products. In contrast, DFI typically requires higher fixed production costs due to the need to establish a physical presence in the foreign market. However, exporting involves higher transportation costs since products must be shipped to the foreign market, while DFI often involves lower transportation costs due to producing goods closer to the foreign market.

In Comparing Exporting to Direct Foreign Investment (DFI), an Exporting