Question 5 Answer

Benefits outlined in theory includes:

-Size of country’s market extends beyond its borders to international markets.

-Cheaper goods and greater variety due to competition generated from international markets.

-Firms become more efficient.

-Economies of scale: Internal economies of scale where large scale production results in reduced cost of production (discount when buying in bulk) and external economies of scale where skilled workers within the industry feed into the firm reducing cost of training, benefit from advertising by the industry, access to improved technology.

-Increased investment – foreign direct investment and this promotes growth as there is freer movement of capital.

-Multinational Corporations (MNCs) ability to spread to other countries facilitates improvements in methods of production, technological advancement and hence improved quality of life for people. In the Caribbean tourism is critical and hence the development of five –star hotels by MNCs help to contribute to inflow of tourists and foreign currency to the Caribbean. The government may not have the start up capital in these counties to build such large infrastructures so we benefit from their existence through receipt of taxes and foreign currencies as well as job creation.

Students may discuss the negative side:

-Loss of jobs due to change in methods of production; skill of those workers become obsolete; however, it can be debated that jobs are created in other areas/industries and persons can be re-trained to be multi-skilled and capable of working across industries.

-Profits from some local firms or investors mainly go back to the host country and some of them are tax evaders resulting in a loss to the host country. Workers are sometimes under-paid while the company is making large profits.

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