When does it become more desirable to shift more activities in the value chain abroad?
A) when the wage of unskilled workers increases abroad
B) when trade costs decline
C) when the wage of skilled workers decreases at home
D) when the price of the final output rises

Question

Quizplus · Accepted Answer

When trade costs decline, it becomes easier and less expensive to shift more activities in the value chain abroad. This can include transportation costs, tariffs, and other barriers to trade. Therefore, with a decrease in trade costs, it becomes more desirable to offshore more activities in the value chain. The other options mentioned are not necessarily factors that would lead to the shifting of activities abroad.

When Does It Become More Desirable to Shift More Activities