Question

Domestic content legislation applied to autos would tend to _________.

1) Increase the cost of autos
2) Decrease the cost of autos
3) Have no impact on the cost of autos
4) Cannot be determined

Answer 1

Domestic content legislation would likely increase the cost of autos, as it can lead to both higher production costs for manufacturers and reduced economies of scale, with these costs often passed on to consumers.

Step-by-step explanation:

Domestic content legislation applied to autos would tend to increase the cost of autos. Such legislation generally requires that a certain percentage of the content of a product be sourced domestically.

Because domestic production can be more expensive than sourcing from countries with lower production costs, implementing these requirements often results in higher costs for manufacturers, which can be passed on to consumers in the form of higher prices for autos. Additionally, domestic content legislation can lead to a reduction in competition and economies of scale, further contributing to increased costs.