Toyota is considering building a production facility in Pakistan. On the Index o

Question

Toyota is considering building a production facility in Pakistan. On the Index of Economic Freedom (IEF), Pakistan scores a 99. Which of the following are reasons the IEF rating might cause Toyota to be hesitant about building the factory?

I. The 99 rating means that Pakistan will keep 99% of Toyota's revenues.

II. The 99 rating means that property rights may not be well defined, so Toyota may lose the factory to government seizure.

III. The 99 rating means that there may be high trade restrictions on imports and exports.

Explanation / Answer

Answer :- since Index of Economic Freedom (IEF) provides high rating to those economies who are relatively more free to trade.free in the sense minimal trade restrictions.for a private investment to take place, private property rights plays a very crucial role.so, the correct alternate is (II). The 99 rating means that property rights may not be well defined, so Toyota may lose the factory to government seizure.

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