Class 10 Economics Chapter 3 Practice Question Answers - Understanding Economic Development

Q1: Why do MNCs set up their offices and factories in those regions where they get cheap labour and other resources?
Ans: MNCs set up their offices and factories in those regions where they get cheap labour and other resources because they bring down the cost of production and ensure more profits for themselves.

Q2: What is multinational corporation?
Ans: A multinational corporation is a company that owns or controls the production of its goods in more than one country.

Q3: Give the meaning of globalisation.
Ans:  Globalisation means integrating the economy of a country with the economies of other countries under conditions of free flow of trade, capital and movement of persons across borders.

Q4: In which two different forms do we participate in the market?
Ans: We participate in the market as producers and consumers.

Q5: Define the term investment.
Ans: An investment is an asset or item that is purchased with the hope that it will generate income in future.

Q6: Explain how globalisation can be made fairer.
Ans: Globalisation can be made fairer in the following ways:

• Policies should be made in such a way that they protect the interests of not only the rich and prosperous producers but also the workers.
• The government can negotiate with World Trade Organisation for fairer rules and can align with developing countries to stand against the domination of developed countries.
• Equal space should be provided to both developed and developing economies to explore the market and compete.

Q7: Explain any three conditions that determine MNCs setting up production in other countries.
Ans: The factors that MNCs take into consideration to set up their production units in a particular place are:

• where it is close to the markets.
• where the skilled and unskilled labour at low costs is available.
• where the favourable government policies looking after their interest are , present.
• where the other factors of production such as raw materials, water, electricity and transport are available.
• where there are standard safety measures for assured production.

Q8: How do large companies often manipulate the markets? Explain with an example.
Ans: The large companies manipulate the market in the following ways:

• Sometimes false information is passed on through media and other sources to attract consumers. For example, a company selling powder milk for babies as the most scientific product claiming it to be better than mother’s milk which although was a false claim.
•  Some food items were consumed in India for many years although it is very harmful for the health of people. But through attractive and convincing advertisements in media, it was able to control the market such as Maggie noddles manufactured by Nestle was found harmful after testing in India in May 2015.
• They may also hide the essential information about the product like expiry date, contents, terms and conditions etc. to keep the consumers in dark.
•  Sometimes, the expired products are packed in a new packing and again released in the market.
• It has also been evident that artificial scarcity is created by the producers and
• the product is hoarded for sale in future at a high price.

Q9:  “Information and communication technology has played a major role in spreading out products and services across countries.” Support the statement.
Ans: Information and communication technology has played a major role in spreading out products and services across countries. In recent years, technology in the areas of telecommunication facilities (telegraph, telephone including mobile phone) are used to contact one another around the world. For example, a news magazine published for London readers is to be designed and printed in India. The text is sent through the internet to Delhi office. Design of the magazine is also sent to Delhi from London office using telecommunication facilities. The design is done on a computer. After printing, the magazines are sent to London by air. The payment for the services from London to Delhi is done instantly through the internet (e-banking).

Q10: How do multinational companies manage to keep the cost of production of their goods low? Explain with examples.
Ans: The multinational companies manage to keep the cost of production of their goods low in the following ways:

• They set up production jointly with some of the local companies of these countries. For example, Ford Motors spent  21700 crores to set up a large plant near Chennai in collaboration with Mahindra and Mahindra. In India, labour and trAnswer:portation cost is very low which cuts down the cost of production.
• They buy up local companies and expand production. For exarflple, Cargill Foods, a large American MNC bought Parakh Foods. The company got ready made infrastructure. As production increases, cost comes down.
• They place orders for production with small producers. They purchase garments, footwear, sports goods and sell them under their brand name.

Q11: “Globalisation has been advantageous to both consumers as well as producers.” Support the statement with suitable examples.
Ans: Advantages of globalisation for consumers:

• They have greater choice.
•  Better quality of products are available for consumption due to competition.
•  It has reduced the cost of goods and services considerably.

Advantages of globalisation to producers:

• They now have access to international markets for their products.
• They have easier access to foreign investment to enhance their production, (c) Collaboration with MNCs have added up their performance and profits.

Q12: “The impact of globalisation has not been visualised uniformly among producers and workers.” Support the statement with facts.
Ans: Everyone has not benefitted from globalisation. While people with education, skill and wealth have made the best use of the opportunities offered by globalisation, the others have not shared the benefits. While producers have become MNCs, the workers are facing many problems. Globalisation and competition among producers have changed the life of the workers. Most employers want to employ workers flexibly which meAnswer: jobs are no longer secure. Earlier workers were employed permanently. Now, they employ the workers temporarily, when there is pressure of work, otherwise they are dismissed.

Q13: How did ‘Cargill Foods’ become the largest producer of edible oils in India? Explain.
Ans: Cargill Foods, a very large American MNC, bought Parakh foods, which had a large marketing network in many parts of India. It was a well reputed company. It had four oil refineries, whose control passed to Cargill Foods. Cargill Foods is, now, the largest producer of edible oil in India, with a capacity of making 5 million pouches daily.

Q14: How have markets been transformed is recent years? Explain with examples.
Ans: The advent of globalisation and the policy of liberalization have opened the market to the world players. It has given rise to wide choice of goods and services to the consumer.

• MNCs have played a vital role in the world market. Foreign trade and investment in’the country has increased. It has also resulted in exchange of technology between countries. In recent times, technology in the areas of telecommunications, computers and internet has been changing rapidly.
• Globalisation has also created new opportunities for companies providing services, particularly those involving in IT. Better job opportunities for people have given rise to migration.
• Globalisation has also enabled some large Indian companies to emerge as multinationals For example, Tata Motors, Infosys, Ranbaxy have expanded their operations around the world.

Q15: Why have the barriers on foreign trade and foreign investment been removed to a large extent by the Indian government? Explain.
Ans:  In 1991, the Indian government decided that the time has come for Indian producers to compete with producers around the world. It felt that foreign competition would improve the quality of goods produced by Indian producers within the country. Thus, barriers on foreign trade and foreign investment were removed to a large extent. It meant goods could be imported or exported easily and foreign companies could set up factories and offices in India.

Q16: “Fair globalisation would create opportunities for all and also ensure that benefits of globalisation are shared better.” Support the statement.
Ans: The government can take the following steps to ensure better sharing benefits of fair globalisation.

• The labour laws should be implemented properly and they should get their due rights.
• The small producers should be supported to improve their performance.
•  It should use trade and investment barriers efficiently.
•  It should negotiate at the WTO for fairer rules.
•  It can also align with other developing countries with similar interests to fight against the domination of developed countries in the WTO

Q17: How is foreign trade inter-connecting the markets in different countries? Explain with examples.
Ans: Foreign trade is the main channel which connects the markets of various countries.

It leads to integration of markets across the countries in following ways:

• It creates opportunities for the producers to reach beyond the domestic markets or the markets of their own countries such as Tata Motors and Ranbaxy of India have emerged as multinational corporations.
• Import of goods from various countries provides choice of goods for consumers beyond the goods that are produced domestically. Availability of foreign goods like television, mobiles etc. has increased the choice of the consumers.
• Producers of different countries compete with each other although they are thousands of miles away.
•  It results in bringing down the prices of commodities which further leads to increase in production and supply. Thus, people have access to cheap products which were costlier earlier.

Q18: What has been the impact of globalisation on India? Explain.
Ans: The impact of globalisation on Indian economy is as follows:

• It has created competition among producers, both local and foreign, which is advantageous to the consumers, particularly the well off. Now, there is a greater choice of goods before the consumers.
•  It has enabled many Indian companies to become multi-national companies such as Tate Motors, Infosys and Ranbaxy.
• It has created new employment opportunities for companies providing services specially information technology. A lot of services such as data entry, accounting, administrative tasks are done cheaply in India and exported to other countries.
• New jobs are created in industries such as electronics, cell phones, automobiles and fast food.
•  It had a negative impact on small manufacturers. Due to competition, some industries has been hit hard such as batteries, capacitors, plastic toys, vegetable oil etc. A number of units have shut down and a lot of workers, have become jobless.

Q19: How has foreign trade been integrating markets of different countries in the world? Explain with examples.
Ans: Foreign trade integrates the markets of different countries as:

• It provides an opportunity for both producers and consumers to reach beyond the markets of their own country.
• Producers now compete with markets located in other countries.
• There is an expansion of choice of goods beyond the domestic market.
• For example, during the Diwali season, buyers in India have the option of buying either Indian or Chinese decorative lights and bulbs. The Chinese manufacturers get the opportunity to expand their business.

Q20: How are MNCs spreading their production across countries? Explain with an example.
Ans: Multinational Corporations (MNCs) are spreading their production in different ways. Some of them are:

• By buying local companies and, then expanding production. For example, Cargill Foods, a very large American MNC, purchased small Indian company, Parakh foods. Cargill Foods is, now, the largest producer of edible oil in India with a capacity making 5 million pouches daily.
• By placing orders for production with small producers. Garments, footwears, sports items are examples where production is carried out by small producers for large MNCs around the world.
•  By producing jointly with some of the local companies. It benefits the local company in two ways.
  • A MNC can provide money for additional investments.
  • A MNC can bring latest technology for production.
• For example, Ford Motors set up a large plant near Chennai, in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks.

Q21: How has globalisation benefited India? Explain with five examples.
Ans: The impact of globalisation on India are:

• It has enabled some large Indian companies to emerge as MNCs such as Tata Motors, Infosys.
• It has also created new opportunities for companies providing services like information technology.
• Greater competition among producers has been of special advantage particularly to the well-off sections of consumers in the urban areas. They have greater choice and enjoy improved quality and lower prices for various products. Thus, they are enjoying a higher standard of living.
• In these industries and services, new jobs have been created and also the companies supplying raw materials to these industries have prospered.
• Several of the top Indian companies have been able to benefit from the increased competition. They have invested in new technology and production methods and raised the standard of their products. Some of them have gained from successful collaboration with foreign companies.

Q22: How has improvement in technology stimulated the globalisation process? Explain.
Ans: The improvement in technology has stimulated the globalisation process as:

• There has been many improvements in trAnswer:port technology in the recent years that have enabled faster delivery of goods across the world.
•  Development of information technology in the areas of telecommunication like internet has revolutionised the world.
•  Use of telegraph, mobiles, fax have enabled faster and easier access to information anywhere at any point of time.
•  All these developments have further decreased the cost of their operations favouring the consumers around the world.
•  It has opened up horizons for further advancement, research and development of existing means.

Q23: What is foreign trade? How does it integrate markets? Explain with examples.
Ans: Trade between two countries is called foreign trade. It may take plate through sea, air or land. It creates an opportunity for the producers to reach beyond domestic markets.

Foreign trade integrates the markets of different countries as:

• It provides an opportunity for both producers and consumers to reach beyond the markets of their own country.
• Producers now compete with markets located in other countries.
• There is an expansion of choice of goods beyond the domestic market.
• For example, during the Diwali season, buyers in India have the option of buying either Indian or Chinese decorative lights and bulbs. The Chinese manufacturers get the opportunity to expand their business.

Q24: Explain the role of Multinational Corporations (MNCs) in the globalisation process.
Ans: MNCs play an important role in the process of globalisation as:

• They not only bring their products to a country but also the new business policies and cultures.
• They also help in increasing competitiveness among the Indian companies.
• At present, most of us are able to use the latest models of cars and this could be possible only because of globalisation.
• The setting up of large number of MNCs develops broad outlook among the people of a country.
• MNCs have increased the choices of consumers at a very substantial price. This has further increase their standard of living.