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Multinaional Corporation

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Q:Define term economic integration.Also discuss its economic effects in long run.
Ans:Definition:Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration.In economics, the word integration was first employed in industrial organisation to refer to combinations of business firms through economic agreements, cartels, concerns, trusts, and mergers—horizontal integration referring to combinations of competitors, vertical integration to combinations of suppliers with customers.
Objectives:
There are economic and well as political reasons why nations peruse economic integration.
· Offering products or services at lower prices with the goal of increasing the combined economic productivity of the states.
· economic integration has been thought of as the "second best" option for global trade where barriers to full free trade exist
· Increase in trade between members states of economic unions that it is meant to lead to higher productivity.
· It gives comparative advantage to countries. Comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost over another.
· To achieve economies of scale. Economies of scale refer to the cost advantages that an enterprise obtains due to expansion.
· Political reasons
· increased efficiency and effectiveness in production as well as distribution of resources
Economic Effects:
· Regional and inter-regional migration of labor results in increase in per capita income.
· Maintain exchange rate of trading countries
· Results include a rapid Industrial development
· Create Economic Stability among trading countries
· Increase in domestic savings rate which result in higher

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