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Why Countries Trade

In: Business and Management

Submitted By april1222
Words 10137
Pages 41
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 Frontier — Table 2.8 B. Production and Consumption Without Specialization and Trade — Figure 2.2 C. Production and Consumption with Specialization and Trade — Figure 2.3

VIII. The Terms of Trade

A. Changes in the Gains from Specialization and Trade ( Table 2.9 ( Figure 2.4 B. Demand Conditions and the Terms of Trade C. Distribution of the Gains from Trade...

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