Explain how it may be profitable for South Korean manufacturers to sell new autos at a lower price in the United States that in South Korea, even with transportation costs included.

Explain how it may be profitable for South Korean manufacturers to sell new autos at a lower price in the United States that in South Korea, even with transportation costs included.

 

 

Answer:

If you transport from South Korea and sell it in US the profit margins of company will decrease. The company would be able to do this only if the total cost including cost of transporation is less than the price at which the company is planning to sell in US. As US is bigger market than South Korea so the sale would increase that will increase total profits while reducing margins.

Asked on February 15, 2018 in economics.
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