Cost cutting in international operations can take place because of:

• A. higher social costs due to negative externalities
• B. increased government regulation abroad
• C. lower labor costs in foreign countries
• D. greater domestic demand for products

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of cost cutting in international operations. This refers to companies reducing their production or operational costs by shifting some activities to other countries.
2. Step 2: Analyze each option in terms of how it affects costs. Higher social costs due to negative externalities usually increase costs, not reduce them.
3. Step 3: Increased government regulation abroad typically raises compliance costs, so it is unlikely to lead to cost cutting.
4. Step 4: Lower labor costs in foreign countries directly reduce the expenses related to wages and salaries, which is a common reason for companies to operate internationally.
5. Step 5: Greater domestic demand for products affects revenue and sales volume but does not directly reduce operational costs, so it is not a reason for cost cutting.