Question

Discussion Board Posts - Please respond to both questions with one paragraph for each.

1. Does exposure to competition with the world leader in a particular industry improve a firm’s productivity?

2. What are the essential arguments in favor of free trade?

Answer 1

1. Competing with a world leader has both positive and negative effects on country.Competing in international markets involves important opportunities and daunting threats.

Advantage-

>Access to new customers- competing with the world leader helps a particular firm to match it's cost and pricing with the leader which helps it to access new and increasing number of consumer.

>Lower cost- Offshoring has become a popular means of trying to reduce costs.it involves relocating a business activity to another country.many firms that compete in international markets hope to gain cost advantage as the world leader country.

Threats-

>Economic risk

>Political risk- it refers to the potential for government interference with business to harm it's operation. Competing with world leader in it's market may lead to strong interference from the government of that country leading to hampering of it's operation and even losses.

>Threat to domestic industries -   Continuos competition with the world leader may put a threat to the domestic firms leading to inefficient production domestically.

2. And open trade system results in higher levels of consumption and inestment ,lower prices of commodities and a wider range of product choices for consumers.Trade also enables workers to become more productive and wages of workers whose skills are scarce internationally tend to rise.When a nation trades it enjoys a larger income owing to a wider range of goods available to consumers .

>Free trade secures all the advantage of international divisions of labor .each country will specialise in production of those goods in which it has a comparative advantage over it's trading partners.

> It enables countries to get commodities which it cannot produce at all or can only produce inefficiently.

>Free trade is free from bureaucratic interference.