comparative advantage Flashcards

1
Q

the realities of CA assumptions

A
  1. 2 countries produce 2 goods → countries trade w many countries, and produce multiple goods
  2. uses half its resources for each good → not true, depend on demand
  3. assume full mobility intra-nationally → not perfectly mobile occupationally or geographically
  4. assume full mobility internationally → easier due to tech improvements, but not full mobility ++ increased mobility w/in countries will DECREASE trade
  5. constant opp cost → opp cost likely to increase over time bc all resources are not equally suitable and efficient
  6. no barriers to trade → protectionism
  7. no transport costs → there is costs, may exceed CA
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2
Q

reasons CA may improve?

A
  1. discovery of new resources that change factor endowments
  2. new tech/ more efficient methods of prod via new raw materials
  3. specialise in industries where EOS can be gained
  4. govt polices to improve qlty of resources
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3
Q

reasons CA may be lost?

A
  1. productivity growths falls behind foreign competition → increased opportunity cost
  2. depletion of natural resources
  3. increased opportunity costs
  4. chaning govt policies
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4
Q

CA table

**very impt!!!!!!!!

A

order: output: before specialisation → after spec, before trade → aft spec, aft trade [cars, rice]
Japan: 100, 50 → 110, 45 → 103, 52
thailand: 5, 10 → 0, 20 → 7, 13
world: 105, 60 → 110, 65 → 110, 65

^^table form!!!

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