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Domestic Firms to Reduce Labour Costs

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1) In a global economy, if domestic firms are unable to reduce labor costs in reaction to foreign competition, then most likely:
a. employers will be forced to find other ways to cut costs and remain competitive.
b. the profits earned by manufacturing firms will be reduced
c. the prices charged for manufactured products will have to be raised.
d. firms will outsource the manufacturing to a foreign country where costs are lower.

2) Assume that in Canada the opportunity cost of producing 2 television sets is 3 bushels of wheat. Assume that in the U.S. the opportunity cost of producing 2 bushels of wheat is 3 television sets. If these two countries specialize according to comparative advantage and then trade with one another, then __________.
a. Canada will import both televisions and wheat
b. Canada will import wheat and export televisions
c. the U.S. will import wheat and export televisions
d. the U.S. will import both televisions and wheat
3) In principle, __________ have ultimate control over the U.S. economy.
a. corporations
b. households
c. multinationals
d. politicians

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1) In a global economy, if domestic firms are unable to reduce labor costs in reaction to foreign competition, then most likely firms will outsource the ...

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