In which of the following situations would tax rate differences among countries be most important for deciding where to place an investment?
A) Companies find advantages in being located near specialized private and public institutions.
B) Companies must compare the benefits of labor- versus capital-intensive production.
C) Companies want to serve an entire region within a regional trading bloc.
D) Companies must deal with difficult start-up regulations.
Question 2
Labor cost advantages gained by moving into a country with low wages may be short-lived because ________.
A) transport costs go up to cancel out the cost savings
B) tax increases cancel out all labor cost differentials
C) rivals adopt capital-intensive production methods
D) competitors follow leaders into low-wage areas
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