Answer :

1. Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries.


2. The competition is thus not just within the county, but also from the producers of different countries.


3. The buyers also get benefitted as they now have more choices and a wider range of products to choose from.


4. With the opening of trade, goods travel from one market to another. Choice of goods in the markets rises. Prices of similar goods in the two markets tend to become equal.


5. Producers in the two countries now compete against each other even though they are separated by thousands of miles.


A recent example of this phenomena would be the sale of Chinese toys and lights in India, which led to a lowering of prices of these products in both the countries.


Explanation- This phenomenon sometimes leads to losses, or to a deterioration in the quality of the manufactured good, as is the case with sale of Chinese toys in India.


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