...identify one developing country and one developed country to compare to the United States. Use the tables below to record data for each country. Then respond to the analysis questions. Table 1: Identify one developing and one developed country along with the United States. Complete a trade analysis for agricultural products. Corn Citrus Number of additional worker hours to produce one unit of citrus instead of one unit of corn United States 2 4 2 Developing Country South Africa 6 10 4 Developed Country Romania 8 10 2 Table 2: Identify one developing country and one developed country along with the United States. Complete a trade analysis for industrial products. Apparel Computer Software Number of additional worker hours to produce one unit of computer software instead of apparel United States 2 4 2 Developing Country South Africa 4 12 8 Developed Country Romania 6 8 2 Analysis—Using the data you collected, answer each of the following analysis questions in well-written paragraphs in your own words. Identify an example of absolute advantage relative to the United States from your data tables. Be sure to identify which country has absolute advantage (U.S. or...
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... Instructor : Mrs . Dailey 1.Use the chart in the lesson to identify one developing country and one developed country to compare to the United States. Use the tables below to record data for each country. Then respond to the analysis questions. Table 1: Identify one developing and one developed country along with the United States. Complete a | Corn | Citrus | Number of additional worker hours to produce one unit of citrus instead of one unit of corn | United States | 2 | 4 | 2 | Developing Country | 6 | 10 | 4 | Developed Country | 8 | 10 | 2 | Table 2: Identify one developing country and one developed country along with the United States. Complete a trade analysis for industrial products. | Apparel | Computer Software | Number of additional worker hours to produce one unit of citrus instead of one unit of corn | United States | 2 | 4 | 2 | Developing Country | 4 | 12 | 8 | Developed Country | 6 | 8 | 2 | 2. Analysis—using the data you collected, answer each of the following analysis questions in well-written paragraphs in your own words. A. Identify an example of absolute advantage relative to the United States from your data tables. Be sure to identify which country has absolute advantage (U.S. or other), the product, and data to support your claim. Tip: When considering absolute and comparative advantage, worker hours to produce one unit is a reflection of productivity. - The chart in the lesson shows...
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...Explain why governments may advocate free trade whilst at the same time resort to protectionism to protect their domestic industries 3 2. Explain what types of barriers may be used and what impact they have on consumers and producers 9 Part1:Explain why governments may advocate free trade whilst at the same time resort to protectionism to protect their domestic industries. Introduction Free trade has been growing the last three decades due to market globalization, industrialization and growing number of developing countries. According to free trade, countries do not restrict imports and exports, and they establish open markets in own areas. Therefore, foreign investors and producers can enter the market freely and trade their goods and services without any trade barriers or taxes. Free trade is exercised between countries based on their agreements with each other. Free trade fosters economic development of developing and poor countries, as well as enable consumers to have access to variety of products and services at lower prices....
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...2. Explain the relevance of this case study to the material seen in class? ① Comparative Advantage -Korea should specialize in the production of color TVs and United States should specialize in the production of agricultural products according to comparative advantage. This is because comparative advantage says that a country should produce goods that it can produce more efficiently and buy the goods that it produces less efficiently from other countries. -In the passage, it says that people in Korea and the United States often thought of trade as an economic war, rather than a ‘win-win’ situation for all. However, this is totally wrong. If the countries specialize in the production according to the comparative advantage, then the potential world production would be greater with unrestricted free trade than it is with restricted trade. ② Ad Valorem Tariff -An ad valorem tariff is levied on the color TVs. The reason for this is that United States wouldn’t apply tax as a fixed charge for each kilogram of the TVs. ③ VER -A Voluntary Export Restraint works like an import quota and Korea voluntarily restricted its exports to United States under its request after becoming a major exporter of color television receivers. Following the repeal of the VER in 1982, the export volume rose greatly and this shows that VER was binding or effective. Also we can say that for United States, it was more costly compared to a tariff as revenue under a tariff becomes rents earned by Korea...
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...which countries' governments do not restrict imports from, or exports to, other countries. * For example, CAFTA is a free trade area involve China and other 10 ASEAN country, January 1, 2010, the trade zone was officially launched. After the completion of the FTA, ASEAN and China's trade accounted for 13% of the world trade, becoming a huge economy covering 11 countries, 1900000000 population, GDP amounted to $6000000000000, is currently the world's largest population of free trade zone, but also the largest FTA among developing countries.To create an economic zone with 1800000000 consumers, nearly $2000000000000 gross domestic product, $1.2 trade volume. * In economics, the principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources. The principle of comparative advantage refers to the advanced level of a kind of innovation and the replacement of the old technology. * For example: * A have an hour to write 100 software or rub 200 pieces of glass. * B have an hour to write 50 software or rub 20 glass * A is stronger than B in each aspect, so that A has absolute advantage. However, B has more advantages in writing software because the efficiency of the glass is even worse, so B has comparative advantage in writing software. * 1. First,regulate supply and demand in the market of various countries. Second...
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...Contents Summery 3 Comparative Advantage theory 4 Theory of comparative advantage 4 Example situation of comparative advantage 5 Examples (Brazil, India, China -Russia) 6 Infant Industries 8 Operation of Capitalism 10 Conclusion 13 Recommendations 14 Bibliography 15 Summery The purpose of this report is to gain an understanding of different theories, ideas behind them and to show examples of how they are implemented. Report outlines the limitations to the idea that countries should be allowed to protect infant industries, like limiting it to a domestic market. Report also looks at Comparative Advantage theories explanation to countries varied fortunes, including the International trade theory and underlining the economic growth, because of the foreign trade. The last question that the report outlines is the economists believes on capitalism in regards to maximising welfare. As a result of the report it was decided to recommend the integration of producers of data categories into international chain. Comparative Advantage theory • How does the Comparative Advantage theory explain countries’ varying fortunes? Use examples to explain your answer. International trade theory International trade plays an increasingly important role in economic development. Throughout the post-war period be volumes of world trade rapidly increased, and their environments- Annual growth (1.5 times) faster than the global the first volume of production. As a result, on...
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...differences among mercantilism, Adam Smith’s theory of absolute advantage, and David Ricardo’s Theory of comparative advantage? 5. Why is the theory of comparative advantage so important in today’s world? 6. According to the theory of comparative advantage, what is the relationship between free trade and economic growth? Does the empirical evidence support this prediction? 7. What is the criticism that Paul Samuel made of theories that advocate free trade? 8. How is the Heckscher-Olin theory different from the theory of comparative advantage? 9. What is the Leontief paradox? Why is it important? 10. What are the central predictions of the product lifecycle theory? What are the limitations of this theory? 11. What does new trade theory tell us about the patter of trade in the world economy? 12. What are the implications of new trade theory for government policy? 13. According to Porter/s theory of national competitive advantage, what are the elements explain why different countries achieve international success in certain industries? 14. What are the implications of Porter’s Theory for government policy? 15. What are the implications of theories of international trade such as the theory of comparative advantage for the location of the different value creation activities performed by an international business? 16. What does new trade theory teach us about first-mover advantages for business firms? 17. How might an understanding of theories...
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...global economy. When countries can trade products and services that they produce with other nations without obstacles, it creates a robust economy for those exporting and importing their products and services. However, there has to be a balance between the nations to prevent protectionism, isolationism and high tariffs on imports, which can lead to trade wars. The debate over free trade and tariffs is a very complicated process as evident with the creation of the World Trade Organization (WTO). “The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business” (WTO, 2010, p.1) Free trade has its advantages and disadvantages. The advantages and disadvantages depends on the frame of thought regarding trade. Within the simulation for international trade, one such advantage was the ability of a country to have a comparative advantage over another . When speaking in terms of a comparative advantage, its referring to a nations ability to produce a product or service at a lower price than another nation. Producing a product or service at a lower cost is the foundation of international trade. All countries who trade have the comparative advantage at something. The advantage could be in the form of skilled labor, technology, agriculture , or natural resources such as oil. When all countries within a free trade...
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...international trade means exchange of goods and services across international boarders. In other to know what is happening in the course of international trade, governments keep track of the transactions among nations. The records of such transactions are made in the balance of payment accounts. International trade and balance of payment are therefore two important aspects in the relationship between nations. 2.0 Importance of international trade It is important as international trade improves or sustains relations between nations and "international trade accounts for a good part of a country's gross domestic product. It is also one of important sources of revenue for a developing country." One fundamental principle in international trade is that one should buy goods and services from a country,...
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...theory assumes that wealth and monetary assets are identical. Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy by encouraging exports and discouraging imports, notably through the use of subsidies and tariffs respectively. The theory dominated Western European economic policies from the 16th to the late-18th century.[1] Absolute Advantage In economics, principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources.[1][2][3][4][5][6] Adam Smith first described the principle of absolute advantage in the context of international trade, using labor as the only input. Since absolute advantage is determined by a simple comparison of labor productivities, it is possible for a party to have no absolute advantage in anything;[7] in that case, according to the theory of absolute advantage, no trade will occur with the other party.[8] It can be contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost. The Heckscher–Ohlin model (H–O model) is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. It builds on David Ricardo's theory of...
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...Globalization and Economic Interdependence: 1. What does globalization mean? Globalization is the acceleration and extension of the interdependence of economic and business activities across national boundaries, in other words a development on one side of the globe will have consequences on another. As a consumer, it means more choices, generally lower prices, and increasingly blurred national identity for products and services. How do the statistics of world trade and direct investment show the trend of globalization? Globalization allows for countries to expand outside of their own country for resources. With this being done, more and more countries are able to interact in world trade and direct investment, which correlate to the trend of globalization increasing. 2. What are the main drivers of globalization? Accelerated technological change, liberation of trade and investment and investment in many countries, and entrepreneurship and competition among firms (location economies, economies of scale, and economies of scope). How do location economies, economies of scale and economies of scope motivate firms to expand their operations overseas? Location economies refer to the cost efficiencies that a firm can achieve by locating some of its activities overseas. Such cost efficiencies can result from lower labor or raw material costs, superior labor skills, or elimination of transport or tariff costs. Economies of scale refer to the reduction of average production costs due...
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...Chapter 1 – Globalization and the Multinational Enterprise Eiteman, Stonehill & Moffett Multinational Business Finance, 12th Ed A Multinational Enterprise (MNE) is one that has operating subsidiaries, branches, or affiliates located in foreign countries. a. MNEs may be headquartered anywhere in the world. b. MNEs are often owned by a mixture of domestic and foreign stockholders. c. Ownership in a MNE may be so dispersed internationally that they may be known as transnational corporations. d. MNEs are often managed from a global perspective rather than from the perspective of any single country. e. The term enterprise is used rather than corporation because as business move into many emerging markets, they will enter into business arrangements with various types of enterprises that are not corporations such as joint ventures, strategic alliances, or simply operating agreements with enterprises that may not be publicly traded or even privately owned, but are actually extensions of the government. Domestic firms may export their products or not. Domestic firms may license foreign firms to conduct the domestic firm’s foreign business. Domestic firms are not protected from international competition. Purely domestic firms must understand the multinational nature of business today. Globalization and Creating Value in the Multinational Enterprise To become a successful multinational enterprise requires (1)...
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...Growth In Developing Countries: a Case Study of Nigeria (1980-2003) SECTION ONE 1.1 INTRODUCTION A ll economies are increasingly open in today’s economic environment of globalization. Trade plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of trade to development depends a great deal on the context in which it works and the objectives it serves. In recent decades, a number of developing countries, most notably the East Asian newly industrializing countries, have been able to purposefully use the elemental force of trade to boost growth and development within a relatively short time span. At the same time many other developing countries, especially the least developed countries (LDCs), have embarked on unilateral trade liberalization in recent years, with very limited results at best in terms of increased growth and development. To act as an engine of development, trade must lead to steady improvements in human conditions by expanding the range of people’s choice, a notion that the concept of human development 3 tries to capture. From this standpoint, the trade and development performance of a country cannot be seen as the mere sum of its economic growth and export performance. Instead, it is a composite notion, reflecting how trade relates to the range of choices available to people in a country at a particular...
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...the environment iv. Economic impacts of environmental policies: c. Economic growth: investment and innovation d. Effect on competitiveness v. International Trade and the environment vi. Effects of Trade on the environment vii. Trade due to differences in Environmental Policies: e. Pollution Haven case viii. Trade not due to differences in Environmental policies: f. Comparative advantage and environment: how factor endowments can influence environment ix. Conclusion x. References xi. Abstract i.Economic growth and the environment In the first half of the twentieth century there was and incredible explosion of international trade: indeed international trade almost triplicate its size.( According to data from www.worldbank.org) A lot of changes contributed to this expansion, first of all technological changes that allowed to reduce distances between countries, the most significant example was the information and communication technologies that grew...
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...manufacturing is outsourced, whether for goods or services, many companies downsize their work force. This creates a loss of jobs for the American industries while increasing jobs in places such as China, India and Indonesia, just to mention a few. Outsourcing, undoubtedly has its comparative advantages as far as having lower wages but it also has risks such as rising costs and trade barriers. It is some of these challenges that is believed to have created a slow re-routing of manufacturing to return to the US Industry. The global trend in manufacturing and outsourcing is that many countries rely heavily on China and other developing nations for manufacturing. For this reason many countries outsource their manufacturing to China. In the article, “The end of cheap China,” the writer reminds us that, “China is the world’s largest manufacturing power and they account for a fifth of global manufacturing.” The primary reason for this trend is due to the cheap labor. It should be noted that global manufacturing is also advantageous to China and other developing nations, since it facilitates economic freedom and increase productivity and standard of living for their population. The primary comparative advantage of outsourcing is obviously lower production and manufacturing costs. A typical worker can be paid as low as seventeen US dollars ($17) for daily wages. Whereby the same job if it were to be done in the US could cost seventeen dollars ($17) per...
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