Final answer:
Trade or functional discounts are mostly given to channel intermediaries, promoting efficient distribution. International trade helps small economies achieve economies of scale and fosters competition and variety. Exclusive dealing agreements, which restrict sales to certain dealers, are complex and can either encourage or inhibit competition. The correct option is A.
Step-by-step explanation:
Trade or functional discounts are offered by manufacturers primarily to channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform.
These intermediaries facilitate the distribution process by acquiring large quantities of goods, adding value through services such as storage and transportation, and selling these goods to retailers or other businesses. Through this system, manufacturers are able to focus on production while intermediaries handle the complexities of distribution.
International trade enables even small economies to achieve economies of scale by expanding their market reach, thus allowing them to produce at a more efficient, cost-effective level. Additionally, it promotes competition and product diversity, compelling producers to innovate and improve, and providing consumers with a greater variety of choices at competitive prices.
An exclusive dealing agreement is a contract where a manufacturer agrees to sell their products only to a particular dealer. While such agreements can be legal and intended to promote competition among dealers, they can potentially limit competition if they confer too much market control on a single retailer, hence having an anticompetitive effect.