What term describes an agreement in which one firm gives another the right to produce and market its product in a specific country or region in return for royalties?

• A. Royalties
• B. Prestige
• C. Acquired Group Membership
• D. Licensing agreement

Answer: (D)

Licensing agreements let one company grant another the right to produce and market its product in a specific country or region in exchange for royalties. In this setup, the licensor provides the license to the licensee to manufacture and sell the product, often using the licensor’s brand, technology, or know‑how. The licensee then pays royalties—usually a share of sales or a fixed fee—as the cost of that permission. This arrangement allows quick market entry and shared expertise without the licensor having to build its own facilities in every location, while the licensee gains access to a proven product or brand.

Royalties describe the payments made, not the agreement itself, so they aren’t the right term for the arrangement. Prestige involves reputation or status, which isn’t what the question is asking about. Acquired group membership is unrelated to this business contract. The licensing agreement best captures the described relationship.