DELGADO, Ed - CASE 2
In a world without trade, what would happen to the costs that the American consumers would have to pay for Logitech's products? 1. American consumers would pay significantly higher prices in a world without trade, but at the same time they would save their jobs. When production of computers shifts to low cost locations, critics argue that the U.S. economy would suffer. However, as the research later shows, the opposite is true, in principle at least. As a result from the lower cost productions supporting new investments in the industry, prices of computer hardware decline. Promotion of computers through the U.S. market is fast, which allowed companies to use computers to their operations and increase productivity. In a world without trade production, assembly, resources, and sale of their products would all have to be conducted in the US, where cheap labor and assembly don’t exist (unless you hire illegal immigrants, that is). Any increase in production expenses would require a rise in retail price for the consumer. Notwithstanding any alleged gains through lower prices for goods manufactured in foreign countries has a counterweight —there is loss of employment and a drastic reduction of consuming power. In my opinion, as long as there is not a balanced trade with other countries, one reality simply cancels the other, thereby wiping away any expected benefits, except for certain sectors of the economy, i.e., manufacturing corporations that reinvest their profits abroad and avoid taxation in the USA. QUESTION 2: Explain how trade lowers the costs of making computer peripherals such as mice and keyboards. As the International trade theory suggests, the lower prices of computers resulting from outsourcing leads to the prediction that the average American consumer could consume more goods and services. In my opinion, that is exactly what happened – products are cheaper which means more affordable for consumers with jobs. On the...
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