Barriers to foreign investment and barriers to

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Barriers to foreign investment and barriers to mobility of FOP such as immigration laws may still pose problems for firms attempting such a strategy.
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(b) Evaluate the various strategies a firm can adopt to respond to the challenges posed by globalisation. [15] Suggested Evaluation and Conclusion In conclusion, globalization poses a challenge in terms of falling revenue from competition from imported goods and services as well as increasing costs from greater competition for the limited factors of production. At the same time, it presents certain opportunities such as the ability to enter into foreign markets and the access to greater pools of resources via outsourcing. However, these strategies all require significant expenditure on the part of the firm and thus do not favour small firms that have limited supernormal profits. Furthermore, globalization is not a homogeneous process and can occur unequally across countries and different markets. Thus the specific policies and the way a government chooses to allow the country’s economy to become more globalized will drastically affect the degree of challenge that globalization poses and the feasibility of certain strategies.
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(b) Evaluate the various strategies a firm can adopt to respond to the challenges posed by globalisation. [15]
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(b) Evaluate the various strategies a firm can adopt to respond to the challenges posed by globalisation. [15]
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Essay Q3: Information failure refers to situations in which economic agents have imperfect information regarding the benefits or costs of their actions as well as when information between the transacting parties is asymmetric in nature. (a) Explain how information failure could lead to market failure. [10] (b) Discuss the view that government intervention to correct the above market failure is always desirable. [15] Imperfect info, asymmetric info “effective”; brings more benefits to society
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(a) Explain how information failure could lead to market failure. [10] Information failure Imperfect info Asymmetric info - Adverse selection - Moral hazard Leads to market failure (either over or under-consumption) Suggested Intro: Define market failure, imperfect info & asymmetric info. Direction statement: Both sources of information failure lead to market failure as they lead to allocative inefficiency through overconsumption OR under-consumption
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(a) Explain how information failure could lead to market failure. [10] Suggested Intro: Market failure refers to a situation where decisions made based on market forces of demand & supply fail to achieve efficiency in resource allocation and thus there is welfare loss to society. Imperfect information means that consumers (or sellers) do not have full relevant knowledge about the product and so they are not able to make a good decision. Consumers may have inaccurate, incorrect or incomplete information about the product. They may also have less information than sellers, in which case this leads to asymmetric information and thus market failure. Both forms of
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