Which of the following is a valid reason to open a new production facility in Latin America?

• A. Limited availability of raw materials
• B. Higher transportation costs to global markets
• C. Access to lower labor costs
• D. Strict government regulations on foreign investment

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of the problem, which is about deciding the valid reason for opening a new production facility in Latin America from a microeconomic perspective.
2. Step 2: Analyze each option by considering typical economic factors that influence location decisions for production facilities, such as costs, resource availability, and regulations.
3. Step 3: Recognize that 'Limited availability of raw materials' is generally a disadvantage, as firms prefer locations with abundant inputs to reduce costs.
4. Step 4: Note that 'Higher transportation costs to global markets' increase expenses, making a location less attractive for production aimed at global distribution.
5. Step 5: Identify that 'Access to lower labor costs' is a valid and common reason for firms to open production facilities in regions like Latin America, as it reduces overall production costs and increases competitiveness.