Describe four advantages of regional integration. Provide an ...

[big1devin]

Describe four advantages of regional integration. Provide an example to illustrate each point.
 
  What will be an ideal response?

Question 2

When a firm allows others to use an entire business system in exchange for compensation, the arrangement is known as ________.
 
  A) industrial design rights
  B) franchising
  C) joint venture
  D) equity venture

[duy1981999]

Answer to Question 1

a. Expand market size-Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc. For example, while Belgium has a population of just 10 million, the absence of trade barriers with other countries in the EU gives Belgian firms easier access to a total market of roughly 500 million buyers.
b. Achieve scale economies and enhanced productivity-Expansion of market size within an economic bloc gives member country firms the opportunity to increase the scale of operations in both production and marketing. This leads to greater concentration and increased efficiency in these activities. For instance, where a German firm may be only moderately efficient when producing 10,000 units of a good strictly for the German market, it greatly increases its efficiency by producing 50,000 units for the much larger EU market.
c. Attract direct investment from outside the bloc-Compared to investing in stand-alone countries, foreign firms prefer to invest in countries that are part of an economic bloc because factories that they build within the bloc receive preferential treatment for exports to other member countries. For example, many non-European firms-including General Mills, Samsung, and Tata-have invested heavily in the EU to take advantage of Europe's economic integration. By establishing operations in a single EU country, these firms gain free-trade access to the entire EU market.
d. Acquire stronger defensive and political posture-Economic blocs allow countries to obtain greater bargaining power and political power in world affairs. For example, the EU enjoys greater influence with the World Trade Organization in trade negotiations than any individual member country. Broadly speaking, countries are more powerful when than cooperate together than when they operate as individual entities.

Answer to Question 2

B