Question

A bank may establish a multinational operation for the reason of low marginal costs. The underlying rationale being that is______.
a) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries.
b) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition.
c) managerial and marketing knowledge developed at home can be used abroad with low marginal costs.
d) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.

Answer 1

Answer:

c) managerial and marketing knowledge developed at home can be used abroad with low marginal costs.

Explanation:

Low marginal cost represents low cost associated with the functioning of bank at low cost for each additional transaction of business. This basically provides for low costing.

Since the bank is able to exercise the low marginal cost in domestic market it expects to have a low marginal cost in international market also with the expertise of management.

As the bank feels confident with the management that it would be able to keep the cost low even in international domains thus, it expects low marginal cost in international domains also.