Foreign competition limits prices domestic companies charge
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1. How does foreign competition limit the prices that domestic companies can charge and the wages and benefits that workers can demand?
2. What political solutions can help companies and unions avoid the limitations imposed by foreign competition?
3. Who pays for these political solutions? Explain.
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1. As domestic producers raise their prices, customers begin substituting less expensive goods and services supplied by foreign producers. The likelihood of losing sales limits the prices that domestic firms can charge. Foreign competition also acts to limit the wages and benefits that workers can demand. If workers demand more money, firms have two choices. Acquiesce in these demands or fight them. Absent foreign competition, the cost of acquiescence is relatively low, ...
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