Final answer:
The true statement about wholly owned subsidiaries is that they overcome trade and transportation barriers by producing locally. They require significant investment and offer the parent company complete control over foreign operations. Additionally, international trade allows small economies to enjoy economies of scale and a wider variety of products.
Step-by-step explanation:
The correct answer to the question regarding wholly owned subsidiaries is c) It overcomes trade and transportation barriers by producing locally. Wholly owned subsidiaries represent a form of foreign direct investment where a company fully owns its ventures in a foreign country. This mode of entry into international markets typically requires significant investment and long-term commitment, but it allows the parent company to maintain complete control over the operations and to benefit from local production which overcomes trade and transportation barriers.
International trade enables small economies to benefit from economies of scale by allowing them to specialize and produce goods or services that they can manufacture efficiently, while importing other items that may be more costly to produce domestically. In doing so, these economies do not only achieve scale, but also ensure that competition is maintained and consumers have a variety of choices, rather than being limited to what is only available within their borders. It is a misconception to think that wholly owned subsidiaries offer the least amount of control. Actually, this mode of international market entry provides the parent company with the highest degree of control over foreign operations, unlike other modes like exporting, strategic alliances, or joint ventures where control must be shared with other parties.