Respuesta :
The competition in international trade drives down prices for consumers.
International competition is the driving force behind the globalization of production and markets. There are several ways how international companies can compete: via exporting, licensing and other contractual agreements, and investment. Competitive market is always characterized with fall of the prices.
The competition in international trade lowers the prices for consumers and induces the producers to become more efficient.
Further explanation:
Effect of competition on prices: The presence of competition in the international trade lowers down the prices for the consumers. In the presence of international trade, goods are produced in those countries that are having a comparative advantage in their production. A country is said to have a comparative advantage in the manufacturing of a specific good if its production cost is least in that country relative to other nations. This ensures a lower price for goods that are internationally traded.
Effect of competition on firms’ efficiency: The competition in the international trade forces the producers to become more efficient in their production process. A high level of competition from highly-efficient foreign firms can wipe out small low-efficient firms in international trade. Thus, the efficiency of the firms of countries participating in international trade rises due to competition.
Thus, competition plays a significant role in international trade by lowering the prices and raising the efficiency of firms.
Learn more:
1. Learn more about protectionist trade policy
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2. Learn more about trade flows
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3. Learn more about international trade
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Answer details:
Grade: Senior School
Subject: Economics
Chapter: International trade
Keywords: what, role, does, competition play, in international trade, trade, presence of competition in international trade, the effect of competition on consumers and producers, comparative advantage, countries having comparative advantage in the production of particular goods.
