The government of Nerumbia wants to open the country’s economy to inte

QUESTION

The government of Nerumbia wants to open the country’s economy to international business, and increase its overall attractiveness as a potential market or investment site. Which of the following will facilitate this decision of the Nerumbian government?

A. Shifting toward command economy or an economy where property rights are not enforced strictly

B. Investing in infrastructure and in the required supporting businesses

C. Frequently changing the government and the government policies

D. Maintaining a high inflation rate

E. Adopting a legal system which does not provide any protection for intellectual property rights

ANSWER

B
With regard to economic factors, one of the most important variables is the sophistication of a country’s economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. At the extreme, an international firm may have to provide its own infrastructure and supporting business, which obviously raises costs.