Which of the following is an advantage of offshore outsourcing in economics?

• A. It guarantees higher product quality in all cases.
• B. It ensures domestic employment increases in the outsourcing country.
• C. It allows firms to reduce production costs by utilizing cheaper labor abroad.
• D. It eliminates all risks associated with international trade.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of offshore outsourcing. Offshore outsourcing occurs when a company contracts out certain business processes or production tasks to firms located in other countries, often to take advantage of lower labor costs or other efficiencies.
2. Step 2: Analyze each option in the context of economic principles related to outsourcing. For example, consider whether outsourcing guarantees higher product quality, affects domestic employment, reduces production costs, or eliminates risks.
3. Step 3: Recognize that while offshore outsourcing can reduce production costs by accessing cheaper labor markets abroad, it does not guarantee higher product quality in all cases, nor does it necessarily increase domestic employment in the outsourcing country.
4. Step 4: Understand that offshore outsourcing involves international trade, which inherently carries risks such as political instability, exchange rate fluctuations, and logistical challenges, so it cannot eliminate all risks associated with international trade.
5. Step 5: Conclude that the primary economic advantage of offshore outsourcing is the ability for firms to reduce production costs by utilizing cheaper labor abroad, which can improve competitiveness and profitability.