Question

Question 1

Most economists agree on the importance of international trade in promoting economic growth and social welfare.Advantages of an open economy include:

		Increased competition for world producers.
		A limited selection of products for consumers.
		Increase market power for world producers.
		Relatively high wage levels for all domestic workers.

Answer 1

Introduction

The effects of globalization are clearly reflected from the high growth trajectory of most countries post having policies in the environment which increase competitiveness and foreign flow of capital into a country respectively.

Key technological innovations have long been credited to the forces of globalization and therefore have reflected in the way countries have progressed from being underdeveloped to developed ones with capital generation being higher and employment opportunities seeing a steady rise respectively.

Case Specifics:-

In the case, the following points have been answered to reflect whether the points are true or false when it comes to the advantages of globalization respectively.

(1) Increased Competition for World Producers:-

Globalization is one of the key reasons for world producers to feel the heat of competition. Take a simple example of the mobile phone manufacturing industry. Apple in the United States faces stiff competition from companies like Samsung and Xiaomi which have rapidly benefitted and have gained the ability to sell their products in the United States due to globalization and its effects.

Similar examples can be given in relatively all industries. The concepts of globalization have effected world producers which rapidly need to innovate to maintain profits.

The option is therefore true

(2) A limited selection of products for consumers.

This is not true. Customers due to globalization can purchase goods at the ease of their living rooms with mobile devices in their hands which can be sourced from any part of the world.

The biggest benefits of globalization have come directly to the consumers in the form of more availability of goods and services. The option is therefore false

(3) Increase Market Power for Producers:-

This statement is false. Even when demand for products is increasing and so is the cost of raw materials reducing the power which a single producer is maintained because of increased competition.

(4) Relatively high wage levels for all domestic workers

This again is not true. Globalization believes in getting work done at the lowest costs regardless of where it happens. An increase in wages is not guaranteed by globalization especially for developed countries which find it difficult to produce the goods at the same cost. Not every country finds domestic workers finding the same returns. Therefore the option is False

Please feel free to ask your doubts in the comments section.