Question

In: Economics

International economics final exam. "Trade models show that international trade has the potential to make everybody...

International economics final exam. "Trade models show that international trade has the potential to make everybody in a country better off". Discuss thoroughly. (40/100)

Solutions

Expert Solution

When a country opens itself up for trade, there are winners and losers. Potentially, the winners can compensate the losers so that everyone benfits from international trade.

Trade between countries leads to expansion in the varieties of goods and services available for the consumers in both countries. It allows the countries to enjoy a higher total output and level of consumption than what would have been possible domestically. Trade also lets you specialize i.e. instead of producing all goods domestically, a country can focus on producing only those goods in which it has a comparative advantage and can import the other goods from the rest of the world. This helps in efficient utilization of resources and lets countries decide on an optimal bundle of goods where it has the lowest opportunity cost. Once a country opens up, the goods where it has a comparative advantage can be exported. Hence, it would be beneficial for some groups. However, other groups and industries might face unfair competition from global firms which are more competitive than domestic firms. These domestic firms can then ask for protection from the government to increase their competitiveness and come to a level where they can compete at a global level.

If the potential gainers from trade, distribute the gains of trade in such a way that the losers from trade also get sufficient compensation, then international trade can potentially make everyone one better off.


Related Solutions

Discuss economic models, trade-offs, and trade. How and why do models play a role in economics?...
Discuss economic models, trade-offs, and trade. How and why do models play a role in economics? *300 word response.
economics International trade, Domestic Market Supply and Demand Topics: To examine the international trade (exports and...
economics International trade, Domestic Market Supply and Demand Topics: To examine the international trade (exports and imports) and/or the domestic market of a product or a commodity for a specific period in time and region. Your essay must identify the key economies relevant to the product as well as how production or processing of this product has helped or hurt these key economies. Your essay should also include properly cited data and evidence from peer-reviewed sources to support your claims....
THIS IS EXAM REVIEW, so please make sure to show the work and make sure the...
THIS IS EXAM REVIEW, so please make sure to show the work and make sure the work is correct. In all tests of hypothesis use the 5% level of significance unless told otherwise. In all confidence interval problems use 95% confidence unless told otherwise. SHOW YOUR WORK. 2. Test scores for a mathematics course have a normal distribution with a mean of 76 and a standard deviation of 12. a.What proportion of scores will be between 70 and 90? b....
Trade agreements lead to more international trade. Explain how trade agreements boost potential GDP
Trade agreements lead to more international trade. Explain how trade agreements boost potential GDP
Please show all work and derivations A "barrel of oil" in international trade has a volume...
Please show all work and derivations A "barrel of oil" in international trade has a volume of 42 US gallons, or 159 L. How much heat would be released if 159 L of pure n-octane (C8H18) was burned completely at constant pressure, and with products and reactant at 298 K. The standard enthalpy of combustion of n-octane is -5471 kJ/mol and its density is 0.703 g/cm^3.
International economics exam Question: Please explain widely all the questions related with FDI: a) Explain the...
International economics exam Question: Please explain widely all the questions related with FDI: a) Explain the determinants of the FDI. b) use real examples to support your answer.
5. International Trade and Welfare Economics Draw a graph for each of the following situations. In...
5. International Trade and Welfare Economics Draw a graph for each of the following situations. In each graph show the following: domestic price (PD), world price (PW), domestic quantity supplied (QSD), domestic quantity demanded (QDD), # of imports or exports (in terms of the QDD and QSD), consumer surplus, producer surplus, total surplus, and deadweight loss. a. Market allowing free international trade where the domestic producers have comparative advantage in the good. b. Market allowing free international trade where the...
Compare and contrast the assumptions and outcomes of the competing formal models of international trade between...
Compare and contrast the assumptions and outcomes of the competing formal models of international trade between countries, which are the constant-cost model and the increasing-cost model.
International Economics Question!! Home and Foreign are two countries that produce cloth and food, and trade...
International Economics Question!! Home and Foreign are two countries that produce cloth and food, and trade these goods with each other. Both goods require labor as an input. Capital is an input for cloth production, and land is an input for food production. In other words, capital and land are specific factors for cloth and food production respectively. There are diminishing returns to labor. Suppose that the capital stock of Home increases due to an external shock. a) How would...
According to ML Jhingan International Economics "What is the formula for Gross Barter Terms of Trade?"...
According to ML Jhingan International Economics "What is the formula for Gross Barter Terms of Trade?" please don't use any other source
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT