COMM 498 Lecture Notes - Lecture 1: Competitive Advantage, Vertical Integration, Double Taxation
Document Summary
Permanent residence test- checking the address of buyer and seller to see if they are really from different countries. International transactions could include, trade, income, and investments: direct investment: full control, portfolio investment: little control. Why does trade occur: differences in labour, resources, physical capital, economies of scale (larger is more ef cient or gain by an increase level of production) create productive advantages for countries. Ricardian model: opportunity cost: cost of producing something measures the cost of not being able to produce something else, comparative advantage: the ability of doing an activity more ef ciently than the other activity compared to another country. Absolute advantage: the ability of a particular country to carry out an activity more ef ciently than the other. Comparative advantage matrix (possible question for the final exam) 100: korea has an absolute advantage in both activities, opportunity cost, korea = 2, thailand = 1. Countries should specialize in countries where they have lower opportunity costs.
