Question

Intricate Wiring Corp., based in Ohio, creates a brand new high-tech product. The demand for the product in the United States is high but very low or non-existent elsewhere. The company decides not to locate manufacturing facilities elsewhere and will simply meet the small foreign demand via exports. The theory that best explains the company's policy is

Answer 1

Answer:a. product life cycle theory.

Explanation:

The Product Life Cycle Theory was created to explain the International trade pattern of a new product. The theory attempts to show that when a product is first invented, its demand and production inputs such as capital and labor, come from the area it was invented in. As the product starts getting more recognised and it's demand increases elsewhere, it will start to export and then continue until it starts manufacturing in other areas to feed the demand of those areas as well.

Intricate Wiring Corp's new high-tech product is following this theory because it has just started out and so its demand is based in its country of origin being the United States. For as long as this is the case, the company should focus on producing in the United States until demand picks up substantially enough to produce elsewhere.