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abbyraelax abbyraelax
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6 years ago
International trade theory implies that international trade is beneficial to all trading countries. However, casual observation leads to the conclusion that official obstruction of international trade flows is widespread.
 
  How might you reconcile these two facts?



Question 2 - If country A has a larger trade triangle than country B, reciprocal demand will lead to an increase in the relative price of A's imports.
 
  Indicate whether the statement is true or false



Question 3 - If a scale economy is the dominant technological factor defining or establishing comparative advantage, then the underlying facts explaining why a particular country dominates world markets in some product may be pure chance, or historical accident.
 
  Explain, and compare this with the answer you would give for the Heckscher-Ohlin model of comparative advantage.
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Replies
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6 years ago
[ 1 ]  This question is meant to allow students to offer preliminary discussions of issues, which will be explored in depth later in the book.

[ 2 ]  TRUE
Explanation: The terms of trade must turn in favor of B for equilibrium.

[ 3 ]  This statement is true, since the reason the seller is a monopolist may be that it happened to have been the first to produce this product in this country. It may have no connection to any supply or demand related factors; nor to any natural or man-made availability. This is all exactly the opposite of the Heckscher-Ohlin Neo-Classical model's explanation of the determinants of comparative advantage.
abbyraelax Author
wrote...
6 years ago
Thanks a whole bunch
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