High transportation costs are a disadvantage for companies that:

• A. have low fixed costs and high variable costs
• B. operate in industries with minimal physical goods
• C. rely on shipping goods over long distances
• D. produce goods exclusively for local markets

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the nature of transportation costs and how they affect companies. Transportation costs are typically variable costs that increase with the distance and quantity of goods shipped.
2. Step 2: Analyze the characteristics of companies with low fixed costs and high variable costs. These companies' costs change significantly with production volume, but transportation costs specifically depend on shipping distance and volume.
3. Step 3: Consider industries with minimal physical goods, such as digital services, where transportation costs are negligible or irrelevant because goods are delivered electronically.
4. Step 4: Evaluate companies that produce goods exclusively for local markets. Since their shipping distances are short, transportation costs are relatively low and less of a disadvantage.
5. Step 5: Conclude that companies relying on shipping goods over long distances face high transportation costs, making this a significant disadvantage compared to the other options.