Question

Which of the following is a disadvantage of barter as a countertrade arrangement?

A. It is a very complex arrangement.
B. In a barter system, if goods are exchanged simultaneously, one party ends up financing the other.
C. Firms engaged in barter run the risk of having to accept goods they do not want or cannot use.
D. It involves huge cash transactions.
E. It cannot be used in transactions with trading partners who are not creditworthy.

Answer 1

Answer:

(C). Firms engaged in barter run the risk of having to accept goods they do not want or cannot use.

Explanation:

Countertrade is a trade system in which goods and services are exchanged for other goods and services.

Barter is a type of countertrade where money isn't involved. Only goods and services are exchanged between participating parties.

A disadvantage of barter is that, in the absence of required goods, a firm may have to accept the goods the other firm is offering even though it doesn't need or cannot use those goods at that point in time. The firm could resell the goods later.