Question

EXERCISES Write your answers in the space provided. 1. Why do companies outsource certain functions to other companies? 2. What are the benefits of free international trade? 3. What are the costs of trade restrictions?

Answer 1

1)

Generally, firms outsource their non-core work to some agencies who are well versed and trained in handling such non-core activities. such outsourcing saves the cost of production and quality of work is enhanced significantly.

2)

Following are benefits of free trade:

• it brings down prices of goods and services and consumers surplus rise.
• The quality of products gets improved.
• there is a rise in the innovation and research activities.
• Competition gets promoted.

3)

Costs of trade restrictions:

• it reduces the output level and quality products would get compromised.
• There is a fall in the competition and consumers are exploited in the market.
• Innovations and researches activities go down.