ECON 1000 Study Guide - Quiz Guide: Factor Endowment, Comparative Advantage, Longrun

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Bobby McPeterson

Document Summary

If free trade, countries can specialize in what they are good at producing and trade creating specialization gains: consumption gains, countries start producing at point a. Increase in dependence improved relations: closed/open economies, world supply is perfectly elastic infinite supply at a price lower than domestic equilibrium (pw, economy with embargo consumes only what it produces ((cid:2868)) at a price of p0. Protectionism types: types of protectionism (trade barriers, embargo, usually done for political/military (i. e. human rights) reasons, tariffs, specific tax, winners/losers. Imports fall from qd - q0 to qquota - q0: same winners/losers as other diagram, answering free trade questions. If economy initially assume to be in free trade, state: discuss initial quantity of domestic production and imports, arguments against protectionism. Lack of competition less r&d/technological innovation (decrease in motivation to increase productivity) productivity gap between domestic & foreign firms widen: decrease ability for domestic firms to compete on international markets.