The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions. Which type of cost reduction would not lead to offsetting welfare gains for the overall economy ?
Correct answer: D. lower wages extracted from workers
- A. R&D generating welfare improved technology
- B. development of more productive machinery
- C. new work rules promoting workers efficiency
- D. lower wages extracted from workers
Explanation
Lower wages are mainly a transfer from workers to the firm, not a genuine reduction in resource use or an efficiency gain for the whole economy. Better technology, machinery, or worker efficiency can create broader welfare gains that offset market-power losses.
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