MGC2120 Chapter Notes - Chapter 6: New Trade Theory, Diminishing Returns, Invisible Hand

• School: Monash University
• Department: Management
• Course: MGC2120
• Professor: Dr Lakmal Abeysekera

Document Summary

International business chapter 6 international trade theory. Free trade: no government intervention in terms of quotas or duties. There is the invisible hand of the market mechanism, should determine a country"s imports and exports. A country"s gain if citizens by products from other nations that could be produced at home: allow a country to specialize in the manufacture and products" exports, however, sometimes difficult for a country"s population to accept. Moreover, a whole country is hurt by such action; limits on imports. Pattern of international trade: climate and natural resource, proportions of factors of production available in each country. New trade theory suggests that some countries specialize in the product and export of particular products because in certain industries the world market can support only a limited numbers of firms. Emerged in england in the mid-sixteen century. Principle assertion: gold and silver considered as currency of trade.