Question

1. Give three possible reasons and briefly explain each (in the context of the models we learned) for why Germany (who has high wages in the auto sector) can export cars to countries with lower wages in the auto sector.

Answer 1

Germany can export cars to countries with low wages because of following :

• Higher degree of specialistiin and venrtical integration between firms and suppliers.
• Growing absolute advantages due to higher availability of raw materials and processing plants
• Ease of doing business and compliance which leads to Cost Leadership and thus focused on export orientation market to achieve diversification.

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