Question

In: Economics

Has growing international trade on balance benefited or harmed the economies of the world? Why or...

Has growing international trade on balance benefited or harmed the economies of the world? Why or Why not? Cite relevant economic concepts

Solutions

Expert Solution

A country can gain from growing international trade if it exports goods for which it is a low opportunity cost producer. A nation that has a lower opportunity cost of producing a good has a comparative advantage. Specialization and trade along the lines of comparative advantage permits the countries to consume more than if they were to produce just for themselves. Thus according to international trade theory, a country can gain by the import of goods that they can be obtain more economically from foreign producers. Hence a nation can benefit if it specializes in producing those things it does best (produces at a low cost).

Moreover, entering global production, and selling the products and services internationally can open up new revenue streams for an organization. The production at internatioal scale results in improving economies of scale. Internatonal trade is useful to product life cycle also. An organisation can phase its release of products; introducing older products into newer markets which are less developed and saving the launch of a new product's which are the most recent version for well-developed markets. It decreases profits of monopolist because globalisation makes market competitive markets. The cost-reducing innovations results to an improvement in dynamic efficiency


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