Economics 1022A/B Lecture Notes - Lecture 12: Import Quota, Infant Industry Argument, Rent-Seeking

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19 Apr 2016

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ECON 1022A/B Full Course Notes

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The goods and services we buy from other countries are our imports, and the goods and services we sell to people in other countries are our exports. Comparative advantage is the fundamental force that drives international trade. Comparative advantage is a situation in which a person can perform an activity or produce a good or service at a lower opportunity cost than anyone else. National comparative advantage is a situation in which a nation can perform an activity or produce a good or service at a lower opportunity cost than any other nation. In the lef graph, with no international trade, the price of a t-shirt is and canada produces and buys 4 million t-shirts a year. The right graph shows that the rest of the world has a comparative advantage in the production of t-shirts because the world price is less than canada"s price. With international trade, the price of a t-shirt in canada falls to .

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I need help with this!!!

International trade can improve efficiency in the use of global resources to make all parties better off. If no one can deny the power of comparative advantage and gains from trade, then why do we continue to resist? Trade happens because we want to sell goods to people in other countries, and we want to buy stuff that is produced in other countries. With individual decision makers acting in self-interest, do you think anyone is watching out for the global economy?

http://www.bbc.co.uk/news/business-29572475 (Links to an external site.)

what you think for this ? do you agree or disagree and why ?

I donât think itâs wise for nations to begin raising tariffs and increasing subsidies when we are faced with a global recession. If a smaller country raises tariffs on a good they are importing, it might not have that big effect on the global economy. However, if a country like China, Japan, United States etc. decide to raise tariffs on imports, it could lead to a global increase in the average tariffs. In the article âBarriers to entry: A rise in protectionism would worsen the already grim outlook for world trade,â it talks about the worldwide average for tariffs. In 1986 they average 26%. If the big economies of the world start increasing tariffs, the rest of the world will eventually follow, leading to a global increase on tariffs. A rise in the tariffs would slow down the global economy even more in the long run. In the article it mentions how trade has picked up immensely when tariffs are lower, and the world GDP was higher compared to when tariffs are increased because countries are more willing to trade. I think theyâre still benefits to be gained from trade even when a global recession may be taking place. If tariffs are increased, countries might try to specialize in goods where they donât have a comparative advantage in. Instead of trading for that good, they will try to produce it domestically. The opportunity cost of choosing to specialize in a good when they donât have comparative advantage is using those resources elsewhere. Perhaps for producing a good they do have comparative advantage in. Also a decline in trade because of rising tariffs means firms wouldnât be able to benefit from economies of scale.

Good Evening My Dear Cramster Family:

I have to answer if these questions are true or false and could you tell me if I am correct with the answers I have chosen? Thank you.

1. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. (T)
2. Certain very talented people have a comparative advantage in everything they do. (T)
3. If a certain trade is good for one person it can't be good for the other one. (T)
4. If a certain trade is good for one person it is always good for a country, it must be good for everyone in the country. (F)

All the best,

Nettie

scarletscorpion75

Economics 1022A/B Lecture Notes - Lecture 12: Import Quota, Infant Industry Argument, Rent-Seeking

ECON 1022A/B Full Course Notes

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