Question

Pick 5 of the concepts below and explain in 50 words maximum each selected concept:

Oligopoly vs. monopolistic competition

The Product Cycle: High Income Countries vs. Low-Income

Outsourcing vs. Offshoring

Interindustry vs. intraindustry trade

Derived Demand and The Stopler- Samuelson Theorem

New Trade Theory: Internal and external economies of scale

OLI Theory

The Specific Factors Model

Export processing zone and maquiladoras

Chapter 4

1. What three dominant factors does migration of labor rely on? Provide information on each.

1. What are the methods that can be utilized to minimize manufacturing job loss?

Answer 1

* Oligopoly vs Monopolistic Competition

Oligopoly: Oligopoly is a market situation where few number of sellers exists in market. Each oligopolist's decision is influenced by the decision of other firm. They set high prices in order to attain profit and in long run they attain abnormal profit. There is barrier of entry into the firm through which sideliners can't enter into the market and capture the excess profit.

Monopolistic competition: It is a form of imperfect competition. They sell the differentiated products in terms of brand, quality and they don't have perfect substitutes of the goods.There are few barriers to entry into the market and producers have some kind of price control. Monopolist have a feature of advertising their products.In the long run they earn normal profit.

*Outsourcing vs offshoring

Outsourcing: Outsourcing is a business practice which hire the employees outside the company in order to perform the task. It can be done to reduce the cost of a company. For example : USA hire the indian employees to perform the task because indian employees are available at cheaper rate.

Offshoring: offshoring is a process through which a company can produce their products at cheaper rate by allocating their industry /company in another developing country. For example: in a developed country, a company can offsouring it's company location in developing country in order to attain cheap cost with better available technology.

*Inter industry vs Intraindustry Trade

Intra industry Trade : Intraindustry trade stated that when both countries are doing exchange the same goods and services. They are exporting and importing of same goods. For example : USA has imported 2 million toys from China and also export 1 million toys to China . As same happened with China.

Interindustry Trade : Interindustry trade is related to different industry. A product is producing in with abundant factor endowment by one country and export the products but they are import the products in which they have relatively less capacity or scarce resources to produce the products.

*Derived demand vs stopler Samuelson theorem

Derived Demand : Derived demand is a kind of market which which cause the demand for another products . For example: if the demand for agricultural goods are increasing then demand for labour and fertilizer's demand will also increase.

Stopler Samuelson Theorem: It is a basis of Hecksher Ohlin Thereom. It is the relationship between relative factor endowment and relative price of output.It shows the change in output price to change in factor price.

*Export Processing Zone and Maquiladoras

Export processing zone: It is a kind of custom area where a country is allowed to import equipment, machinery, plant for the manufacturing of export's goods and services without paying duties. It is licensed by the Ministry of Trade by different partner states. It is set up to enhance the industrial and commercial export.

Maquiladoras: It is a kind of company which allows the factories to be duty free and tariff free. Factories take the raw materials and manufacture them and finally export the finished goods. A factory is located near the United States- Mexico border. It is a kind of low cost company and providing the means of employment opportunities.