...Our reading material, for this week, describes the gains for trade as moving “goods, services, and resources from people who value them less to people who value them more” (Gwartney, Stroup, Sobel, & Macpherson, 2013, p. 320). Trade allows the trading partners to increase their output level therefore increasing their income level (Gwartney, Stroup, Sobel, & Macpherson, 2013, p. 320). A business can focus on a specific product that they do well in order to maximize profits. Trade allows individual and business to obtain items that they cannot or would be very expensive to make themselves. The gains that trade allows is that consumers can benefit from a larger selection of goods to make a selection from. Author Denise H. Froning states that “Free trade enables more goods and services to reach American consumers at lower prices, thereby substantially increasing their standard of living” (Froning, 2000). Trade provides a bolster to an economy as described in an article from The Economist on the results of the NAFTA Trade agreement, “…Mexico—an emerging market hitched to two larger, rich ones—has been NAFTA’s biggest beneficiary” (Deeper, better, NAFTA, 2014). Trade allows for a struggling economy to benefit from the assistance of other more established economies, although this is not to say that all economies cannot see gains form trading with others. The Office of the United States Trade Representative states that “Trade between the United States and its NAFTA partners has...
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...Interdependence and the Gains from Trade 3 • You wake up to an alarm clock made in Korea. • You pour yourself orange juice made from Florida oranges and coffee from beans grown in Brazil. • You put on some clothes made of cotton grown in Georgia and sewn in factories in Thailand. • You watch the morning news broadcast from New York on your TV made in Japan. • You drive to class in a car made of parts manufactured in a half-dozen different countries. Copyright © 2004 South-Western Copyright © 2004 South-Western/Thomson Learning Interdependence and the Gains from Trade • . . . and you haven’t been up for more than two hours yet! • Remember, economics is the study of how societies produce and distribute goods in an attempt to satisfy the wants and needs of its members. Copyright © 2004 South-Western Copyright © 2004 South-Western Interdependence and the Gains from Trade • How do we satisfy our wants and needs in a global economy? • We can be economically self-sufficient. • We can specialize and trade p with others, leading to economic interdependence. Interdependence and the Gains from Trade • Individuals and nations rely on specialized production and exchange as a way to address problems caused by scarcity. • But this gives rise to two questions: • Why is interdependence the norm? • What determines production and trade? Copyright © 2004 South-Western Copyright © 2004 South-Western 1 Interdependence and the Gains from Trade • Why is interdependence...
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... Paper #1 Prof. Nolt International Economics April 13, 2013 Mexico Trade: Gain Advantage from Low Cost Executive Summary: In the essay, I mainly discuss the comparative advantage of Mexico trade. After analyzing the related data and sources, I find that Mexico has the major advantage of production cost compared with its major export partners. Mexico exports more labor-intensive goods to the NAFTA members, the US and Canada, which also reflects that the economic globalization promotes the development of Mexico trade. Background: Mexico is the eleventh largest economy in the world, with a GDP of US$1.66 trillion in 2012. Mexico exported $336.3 billion and imported $341.9 billion last year. Mexican exports are not only raw materials such as oil or silver, but also manufactured goods and even high-technology products, including assembled aircraft, pharmaceuticals, communications equipment, and computer and office machinery, which represent 19.6% of total Mexican exports. The United States is Mexico’s largest trading partner (73.5%), followed by Canada (7.5%) and Germany (1.7%). Mexico is also one of the countries with most trade agreements in the world, having 12 free trade agreements with over 40 countries including North and Central America, the European Free Trade Area and Japan, putting more than 90% of its trade under free trade agreements. Main Body： Mexico’s export industry is labor-intensive because it has the comparative advantage...
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...Summary for Chapter 3’Interdependence and the Gains from trade’ In this chapter, I learn how the economy coordinates the activities of individuals or nation. To make a better understand, I conclude the contents of this chapter with nine questions which answers are key to the modern global economy. 1. What are opportunity costs? Are they part of the economic way of thinking? Opportunity costs ----the highest-valued alternative that must be forgone when a choice is made, are the forgone opportunities if the next best alternative. Choice means both gaining something and giving up something. When you choose one option, you forgo all others. The benefits of the next best alternative are the opportunity costs of your choice. Opportunity costs are part of every decision and activity. Each choice means giving up something else. a. Opportunity costs are the benefits that are forgone as a result of a choice. When you choose one thing, you must give up—forgo—others. b. Opportunity costs are an individual concept but can be used to demonstrate scarcity and choice for a society as a whole. 2. What is comparative advantage? Comparative advantage: the ability to produce a good or service at a lower opportunity cost than another producer. Comparative advantage exists whenever one person (firm, region, or nation) will specialize in the production of the good or service that has the lowest opportunity cost. 3. Why does specialization occur? Comparative advantage...
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...International Trade and Competition What constitutes the basis for trade? Also what are the gains from trade in terms of production and consumption? The purpose of this report is to survey what constitutes the basis for trade in an international perspective and to discuss the gains in relation to production and consumption. By examining a range of recently published journal articles, magazine articles and internet sites on the topic of international trade this paper will describes the main basis’s of trade in common use today such as Factor-Endowments and overlapping demand, and will also examine their importance. In relation to the gains of international trade I will investigate a number of gains in relation to consumption and production. This paper will focus on international trade, which can be defined as the exchange of goods and services between nations. This type of trade gives rise to a world economy, in which prices, or supply and demand, are affected by global events. A basic question in the study of international economics is 'why do nations trade?' or in other words, 'what is the basis of international trade?' The basis of all economic activities, including international trade, is essentially the human desire to improve its standards of living, i.e., to consume more and more of superior goods and services. It is this desire that creates a process of trade between the nations. Firstly you must look at the immediate basis for trade which is stemmed from the cost differences...
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...Inc. In this chapter: Introduction The Mercantilists’ Views on Trade Trade Based on Absolute Advantage: Adam Smith Trade Based on Comparative Advantage: David Ricardo Comparative Advantage and Opportunity Costs The Basis for and the Gains from Trade under Constant Costs Introduction Basic questions: What is the basis for trade? What determines which country exports each good? What are gains from trade? What benefits do countries get from international trade? Which goods are exported/imported by each country? What is the pattern of trade? Assume two-nation, two-good world The Mercantilists’ Views on Trade Mercantilism Economic philosophy in 17th and 18th centuries, in England, Spain, France, Portugal and the Netherlands. Belief that a nation could become rich and powerful only by exporting more than it imported. A nation’s wealth is measured by the amount of precious metals it owns. The Mercantilists’ Views on Trade Mercantilism Export surpluses bring inflow of gold and silver. Trade policy was to encourage exports and restrict imports. Mercantilists advocate excessive government intervention to impose this trade policy. Trade is a zero-sum game: One nation gains only at the expense of another. In other words, mutual benefits from trade are impossible! The Mercantilists’ Views on Trade Mercantilists measured the wealth of a nation by the stock of precious...
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...Chapter Outline I. Introduction II. International Trade Versus Interregional Trade ( international trade occurs for the same reasons as interregional trade ( gains from technology and gains from trade III. Trade in an Individual Product ( trade in cloth (U.S./India) — Figure 2.1 ( supply and demand ( the effects on India and the U.S. IV. Trade Based on Absolute Advantage A. Absolute Advantage ( PASSPORT: Football Games, Rats, and Economic Theory ( PASSPORT: Mercantilism ( Table 2.1 B. The Gains from Specialization and Trade with Absolute Advantage ( gains from trade — Table 2.2 ( the labor theory of value V. Trade Based on Comparative Advantage A. Comparative Advantage ( Table 2.3 ( David Ricardo ( Babe Ruth B. The Gains from Specialization and Trade with Comparative Advantage ( PASSPORT: Principal Exports of Selected Countries — Table 2.4 ( Change in world output — Table 2.5 VI. Trade Based on Opportunity Costs A. Opportunity Costs ( PASSPORT: Labor Costs as a Source of Comparative Advantage — Table 2.6 B. The Gains from Specialization and Trade with Opportunity Costs ( Table 2.7 ( Autarky VII. The Production Possibilities Frontier and Constant Costs A. The Production Possibilities...
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...Do Professional Traders Exhibit Loss Realization Aversion? Peter R. Locke * The George Washington University Steven C. Mann ** Texas Christian University November 2000 * Finance Department, School of Business and Public Management, The George Washington University, Washington DC, 20052. plocke@gwu.edu, (202) 994-3669. ** M.J. Neeley School of Business, Texas Christian University. Fort Worth, Texas 76129 S.mann@tcu.edu ; (817) 257-7569. We wish to thank Peter Alonzi, Chris Barry, Rob Battalio, Gerald P. Dwyer, Avner Kalay, Paul Laux, Paula Tkac, Steve Manaster, Arthur Warga, and seminar participants at the 1998 FMA meetings, the 1999 Chicago Board of Trade Spring Research seminar, the 1999 Western Finance meetings, the 1999 Southern Finance meetings, the Commodity Futures Trading Commission, TCU, University of Texas at Dallas, and the First Annual Texas Finance Festival for discussions and comments helpful to the evolution of the paper. Pattarake Sarajoti provided valuable assistance. Mann acknowledges the support of the Charles Tandy American Enterprise Center. A good portion of this work was completed while Locke was on the staff of the U.S. Commodity Futures Trading Commission. However, the views expressed are the authors’ only and do not purport to represent the views of the Commodity Futures Trading Commission or its staff. Do Professional Traders Exhibit Loss Realization Aversion? Abstract Recent evidence (e.g. Odean, 1998a) describes investor behavior...
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...Income Tax Losses Toolkit 2012-13 Self Assessment Tax Returns Published May 2013 Index Introduction .................................................................................................................................. 3 Areas of risk within Income Tax losses ........................................................................................ 3 Using links within this document .................................................................................................. 6 Checklist Income Tax losses........................................................................................................ 7 Explanation and mitigation of risks............................................................................................... 8 2012 -13 2 Introduction Tax agents and advisers play an important role in helping their clients to get their tax returns correct. This toolkit is aimed at helping and supporting tax agents and advisers by providing guidance on the errors we find commonly occur in relation to Income Tax Losses. It may also be helpful to anyone who is completing an Income Tax Self Assessment tax return. This version of the Toolkit was published in May 2013. The risks in this toolkit have been reviewed and updated where necessary for 2012-13.This toolkit is applicable for financial years commencing 6 April 2012 for Income Tax Self Assessment tax returns. Its use is entirely voluntary. The content of this toolkit is based on our view of how tax...
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...asset, unless expressly excluded 2- the following types of property are not capital assets: a) Inventory (or stock in trade) property held primarily for sale to customers in the ordinary course of a trade or business b) Real or depreciable property used in a trade or business c) Accounts or notes receivable acquired in the ordinary course of trade or business for services rendered d) Copyrights and artistic compositions held by the person who composed them e) Certain U.S government publications acquired at reduced cost 3- property held either for personal use or for the production of income is a capital asset, but dealer property is not 4- Goodwill is a capital asset when generated within the business. IF a business sells its assets and received more than FMV of those assets, the remainder is considered a capital gain from the sale of goodwill a) Goodwill acquired with the purchased of a trade or business in an amortizable asset b) The ability to amortize, characterizes acquired goodwill as a sec 1231 asset rather the\an a capital asset 5- an option is treated the same as the underlying property 6- stocks, bonds, commodities and the like are capital assets unless they are dealer property. A dealer holds an asset primarily for sale to customers in the ordinary course of his/her trade or business. Their benefit does not come from a change in the value of securities, as opposed to traders and investors. But assets identified as held for investment by...
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...derived demand; Gains from trade; absolute advantage; Unit labor requirement; nontraded goods. Multiple Choice Questions 1. Countries trade with each other because they are _______ and because of ______. A. different, costs B. similar, scale economies C. different, scale economies D. similar, costs E. None of the above. 2. Trade between two countries can benefit both countries if A. each country exports that good in which it has a comparative advantage. B. each country enjoys superior terms of trade. C. each country has a more elastic demand for the imported goods. D. each country has a more elastic supply for the supplied goods. E. Both C and D. 3. The Ricardian theory of comparative advantage states that a country has a comparative advantage in widgets if A. output per worker of widgets is higher in that country. B. that country's exchange rate is low. C. wage rates in that country are high. D. the output per worker of widgets as compared to the output of some other product is higher in that country. E. Both B and C. 4. In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ____unit labor requirements A. One B. two C. three D. four E. five 5. A country engaging in trade according to the...
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...______________________________________________________________________________________________ Comparative Advantage The division of labor facilitates production of a given good, but how do individuals or groups determine which specific goods or services to produce? The maximum potential gains from trade tend to be realized if you specialize in that activity which you can do at the lowest cost relative to other people’s costs. In 1817, David Ricardo, an influential early economist, focused on international trade when he generalized this idea into an economic law. The law of comparative advantage: Mutually beneficial exchange is possible whenever relative production costs differ prior to trade. This law applies to all exchanges, whether between individuals or nations. Opportunity cost is the key to comparative advantage: Individuals and nations gain by producing goods at relatively low costs and exchanging their outputs for different goods produced by others at relatively low cost. All potential trading partners can gain enormously through appropriate specialization and exchange. Oranges are grown at lower cost in Florida than in Iowa, for example, while Iowa excels in producing corn. Floridians and Iowans share gains from exchange according to...
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...name and ID number. Please staple your work. 1. Use a diagram to explain how immigration and trade may worsen wage inequality, and how college education may mitigate against that. 2. Which of the following suggests that a nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used? a. | The Linder theory | b. | The product life cycle theory | c. | The MacDougall theory | d. | The Heckscher-Ohlin theory | 3. Assume that Country A, in the absence of trade, finds itself relatively abundant in labor and relatively scarce in land. The factor endowment theory reasons that with free trade, the internal distribution of national income in Country A will change in favor of: a. | Labor | b. | Land | c. | Both labor and land | d. | Neither labor nor land | 4. When considering the effects of transportation costs, the conclusions of our trade model must be modified. This is because transportation costs result in: a. | Lower trade volume, higher import prices, smaller gains from trade | b. | Lower trade volume, lower import prices, smaller gains from trade | c. | Higher trade volume, higher import prices, smaller gains from trade | d. | Higher trade volume, lower import prices, greater gains from trade | 5. Which trade theory suggests that a newly produced good, once exported, could ultimately end up being imported as...
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...regions begins with the classic theory of customs unions formulated by Viner, Meade and others and has been developed more recently in the context of imperfect competition (see Baldwin, 1997 for an accessible overview on which we draw in this section, as well as the recent volume by Schiff and Winters (2003) which summarizes the results of World Bank research on regional integration and development). This traditional theory is contrasted with the ‘developmental regionalism’ espoused by some theorists concerned with developing countries and still dominant among those concerned with African regionalism. With the trend towards deeper integration, we summarize the emerging literature on the gains from integrating services trade and from regulatory integration. The lessons for developing countries from the literature surveyed are summarized in conclusion. Table 3 - Debates about regionalism Motivation -why do regions come into being?Structure - what form do regions take, and why do they take these forms?Design - how should regions be designed to ensure they function efficiently?Impacts - are regions successful in promoting more rapid economic growth for members, and what are the consequences of third parties?Convergence - do regions assist in the convergence of economic performance and living standards between participating countries?Sustainability - what contributes to the...
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...1 Chapter 2 Key Concepts & Terms Autarky Commodity terms of trade Complete specialization Constant opportunity costs Consumption gains A case of national self-sufficiency or absence of trade (p. 37) Measures the relation between the prices a nation gets for its exports and the prices it pays for its imports (p. 43) A situation in which a country produces only one good (p. 39) A constant rate of sacrifice of one good for another as a nation slides along its production possibilities schedule (p. 36) Post-trade consumption points outside a nation’s production possibilities schedule (p. 39) Basis for trade Why nations export and import certain products (p. 29) Dynamic gains The effect of trade on the country’s growth rate and thus on the volume of from additional resources made available to, or utilized by, the trading country (p. international 44) trade Free trade A system of open markets between countries in which nations concentrate their production on goods they can make most cheaply, with all the consequent benefits of the division of labor (p. 30) Gains trading partners simultaneously enjoy due to specialization and the division of labor (p. 39) When one trading nation is significantly larger than the other, the larger nation attains fewer gains from trade while the smaller nation attains most of the gains from trade (p. 42) When each additional unit of one good produced requires the sacrifice of increasing amounts of the other good (p. 47) The cost or price of...
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