The textile industry in Bangladesh, counted as one of the poorest countries in t
ID: 392580 • Letter: T
Question
The textile industry in Bangladesh, counted as one of the poorest countries in the world, experienced a surprisingly positive turn when the old economic system based on preferred access was replaced with a system based on free trade.
David Ricardo's comparative advantage theory proposes that nations should specialize in the production of goods and then engage in international trade. Unrestricted free trade between nations raises the economic welfare of countries that participate in free trade. Michael Porter of the Harvard Business School has further developed the idea of comparative advantage by proposing four broad attributes that help impede or promote the comparative advantage of a nation.
1). Which factor helps Bangladesh's goods stay competitive when compared to goods from China?
A). Higher quality goods
B). The U.S. favors Bangladesh goods
C). Easier importation
D). Less tax on Bangladesh's goods
E). Fear of relying on a single country
2). According to Hecksher-Ohlin theory, which of the following gives Bangladesh a cost advantage?
A). Capital-intensive production
B). Technology-intensive production
C). Land-intensive production
D). Labor-intensive production
Explanation / Answer
The correct option is
E). Fear of relying on a single country
Bangladesh is very good at manufacturing for the textile. Its products are very cheap due to lower cost and higher margins. It is liked by the American companies as the product gives lower costs and higher margins. It is getting competition from the China hence it has the fear of losing the business. So it has fear that the nations will not buy its product. That is why Bangladesh's goods stay competitive when compared to goods from China.
D). Labor-intensive production
Bangladesh is a poor country hence labor cost is very cheap. Capital, technology, and land are better in the other countries as well. But labor cost is high than Bangladesh,.
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