Which statement best explains why jobs may be outsourced?

• A. Firms outsource jobs to reduce production costs by hiring labor in countries where wages are lower.
• B. Firms outsource jobs to increase the number of employees in their home country.
• C. Firms outsource jobs to decrease their overall output.
• D. Firms outsource jobs to avoid technological advancements.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of outsourcing in microeconomics. Outsourcing occurs when a firm contracts out certain tasks or jobs to external firms or hires labor from other countries, often to reduce costs.
2. Step 2: Identify the main motivation behind outsourcing. Firms typically outsource to lower production costs, which can be achieved by hiring labor in countries where wages are lower than in the firm's home country.
3. Step 3: Analyze the given options by comparing them to the economic rationale for outsourcing. Increasing the number of employees in the home country or decreasing overall output does not align with the cost-saving motive.
4. Step 4: Recognize that avoiding technological advancements is unrelated to outsourcing decisions, as outsourcing is primarily about cost efficiency rather than technology avoidance.
5. Step 5: Conclude that the best explanation is that firms outsource jobs to reduce production costs by hiring labor in countries where wages are lower, which aligns with the economic principle of minimizing costs to maximize profits.