Question

Do the jobs for workers in low-income countries that involve making products for export to high-income countries typically pay these workers more or less than their next-best alternative?

a) More
b) Less

Answer 1

Jobs in low-income countries for export to high-income countries often pay more than local alternatives. Trade barriers lower real incomes and wages. Predatory pricing can lead to dumping with intentions of market monopolization. Option A is correct.

Step-by-step explanation:

Jobs for workers in low-income countries that involve making products for export to high-income countries typically pay more than their next-best alternative. This is because firms like Nike must offer competitive wages to attract workers, often more than what they could earn in subsistence farming or local industries.

Trade barriers tend to raise prices, leading to a decrease in real incomes, thereby lowering the average income level in an economy. Moreover, workers in both protected and other sectors may experience a decrease in their real wage due to trade barriers.

Predatory pricing used as a strategy for dumping can be motivated by the desire to underprice domestic firms and eventually monopolize the market, which could lead to short-term losses for the dumping firm but potentially higher long-term profits.