International Trade Midterm Study Guide

Imagine a world where trade was not allowed. If someone wanted an apple, then they would have to wander until they found an apple seed, plant and grow the tree using the rain they gathered from hand-made cups or barrels, and wait for years until the tree brought forth fruit. In order to build a house, this person would have to cut down trees with an axe that they forged and built themselves, then they would have to make mud to hold the lumber together so that they could build the house. Forget about electricity, cars, cell phones, most modern technology, because none of these things would be possible without trade. Fortunately, we live in a time when trade is widely accepted across the world. Charles Wheelan, an international economist, notes

2. What makes China so attractive to U.S. food companies? Discuss why it is important to gain

It has been said that because of immigrant’s minimum wage keeps getting lower. This is not true. Because of immigrants, we are able to get “consumer goods” at such a low price. Also because immigrants work for less than minimum wage, it cuts the prices of our goods, which allows us to get it for the prices we do. “When people migrate from one nation to another, the supply of labor in the

For the last two centuries the international trade evolved a lot and many economists tried to explain it. One of the first theories that attempted to explain the international trade pattern was the Absolute advantage theory. A.Smith was a great economist; he is the one who created this theory. For A. Smith countries should specialize in products in which they have an absolute advantage. It was a good Theory but it was excluding countries that did not have any absolute advantage. David Ricardo another great British economist found this loophole in Smith’s theory and

Due to the differences between the countries in its profitable fundamentals; the International Trade occurs. The contracts between the countries consider as the primary driver of the global exchange. These contracts concluded on the basis of the countries beneficial elements and advantages. Each international trade between the countries depends on numerous focal points of this exchange process. The economics and producers effectiveness measured by absolute advantage for these economics/producers. For example; if the producer needs lesser amount of contributions/inputs to provide specific product, then this producer has an absolute advantage in producing

When evaluating the benefits of free trade, the first economic concept we must look at is comparative advantage: the comparative benefit one nation has over another in the production of a

Income Inequality means the uneven income is distributed among individuals in a company, groups in a population, or countries in the world. “One-fourth of American employees make less than $10 per hour, which is the income that below the Federal poverty level” (Amadeo). Those are the people like cashier, waiters, or fast food clerks. There is a huge gap between rich people and poor people. The rich people are getting richer while the poor people are getting poorer. This is a serious economic challenge that the United States has been facing for a long time period.

The theory of comparative advantage explains the benefit of free trade. According to this theory by David Ricardo in the early 19th century, “Both countries will be better off if each specializes in the industry where it has a comparative advantage, and if the two trade with one another.” (Citation) International trade opens up markets to foreign supplier, and domestic companies need to improve their efficiency, boost productivity, and lower cost to increase competitiveness instead of enjoying monopolies or oligopolies that enabled them to keep prices well above marginal costs. On the other hand, international trade also offers domestic companies bigger demands and broader markets; therefore more jobs relevant to export have been created. Furthermore, jobs in the US supported by goods exports pay 13-18 percent more than the US national average (ustr.gov).

For small developing countries unable to manufacture necessary items the world market presents an opportunity to obtain those items. Even being able to subsidize a country's food resources or modernize a country's food production can change an entire nation's economy. For countries who have an abundance of certain resources being able to trade them

Absolute Advantage is the comparison of productivity of a person, company, or nation to another person, company, or nation and the ability to produce with fewer inputs (what is used to make the product) than another producer. Comparative Advantage is the opportunity costs (what must be given up to obtain an item) between two producers and the ability to produce at lower opportunity costs than another producer. Absolute Advantage can be found in both goods that are produced by an individual, company, or nation, while Comparative Advantage is impossible to be found in both goods that are produced by an individual, company, or nation. Although Absolute Advantage is important in international trade, Comparative Advantage plays a larger part and is a key factor in international trade. N. George Mankiw states, “The principle of comparative advantage states that each good should be produced by the country that has the smaller opportunity cost of producing that good” (2014, p. 58). The downfall is that some individuals may be worse off from international trade, while the country’s overall well-being is better off. Absolute and Comparative Advantage are a large part of international trade, which can be beneficial to the economy as a whole.

Few can contend that the world is more interconnected and interrelated more than ever. This web of interdependency is primarily made possible by trade, and in the twenty-first century, a large and significant portion of trade is conducted on a global scale. Furthermore, while the majority of people agree that free trade can benefit both parties in terms of economic development and an increase in overall production, many critics have voiced their fears of the negative consequences that may result from a global trade environment with few barriers or limits. Proponents of free trade argue that benefits far outweigh costs and that the primary gain is efficiency of production achieved through comparative

The theoretical perspective that the author uses to support its evidence is the liberal perspective. In the book, “The Global Future: A Brief Introduction to World Politics” Kegley & Raymond (2005) explain how “At the core of liberalism is a belief in reason and possibility of progress” (p.31). Which is one of the main points and arguments that this paper makes. The paper continuously talks about the possibility of progress if trade is expanded. One specific example of this is in the category of the article “Keep On Growing” (p.2) where Froman (2014) states that “U.S. trade policy aims not only to update the global economic architecture, but also expand it”(p.2). It further goes to explain the correlation between trade and economic

Economists use the term absolute advantage when comparing the productivity of one person, firm or nation with that of another. The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good (Gans, King, & Mankiw, 1999).

     International trade has been in existence throughout history and has an economic impact on the participating countries. Trade in most countries has a share of the Gross Domestic Product (GDP) and helps to boost the

According to Colander, "The reason two countries trade is that trade can make both countries better off" (2004, p. 416). In economics, the theory of comparative advantage clarifies why it can be advantageous for two countries to trade, even though one of them may be able to produce every kind of item more cheaply than the other. What matters is not the absolute cost of production, but instead, the ratio between how easily the two countries can produce different kinds of goods. The basic idea of the principle of comparative advantage is that as long as the relative opportunity costs of producing goods differ among countries, then there are potential gains from trade.