Chapter1 2. a. How does foreign competition limit the prices that domestic company and the wages and benefits that workers can demand? Answer: More foreign companies in the country means more options customers could choose. If the domestic companies increased their prices of produce, the local customers will find another similar products instead. Foreign competition also acts to limit the wages and benefits that workers can demand, because build a company overseas, company have to spend more money than local companies, if workers demand more wages and benefits, the costs for products will increased for sure. As for the domestic companies, the same problem they are facing. On the other situation, if local company agree to pay more money to their workers but the foreign companies do not, they must transfer this part of cost to their products, therefore, they will lose their strength of their price. b. What political solutions can help companies and unions avoid the limitations imposed by foreign competition? Answer: One of the solutions is protectionism, the government came out some polices by limiting foreign competition, such as increasing their tax. In the meanwhile, the government also protects their local companies, such as decreasing tax and gives them lower fee using imports to produce their own goods and services for sale. c. Who pays for these political solutions? Explain. Answer: Government need to use tax to pay the services fee, Customers will pay money to buy the products, and actually the extra costs included in those prices. The companies should pay for their resources and services. 3. a. What factors appear to underlie the Asian currency crisis? Answer: Some Asian countries such as China, Korea, and India, they normally make things to export to north America and Europe, on the contrast,