Global Business Management Chapters Review
GLOBAL BUSINESS MANAGEMENT
Chapters review
Chapter 5
Free trade: government not try to influence through quotas or duties what can be bought from/sold to other country
Benefits: -Smith, Ricardo and heckscher Ohlin predict that the consequences of fee trade include both static economics gain (because free trade supports a higher level of domestic consumption and more efficient utilization of resources) and dynamic economic gains (because free trade stimulates economic growth and the creation of wealth) * Free trade benefit even when it can produce itself (promote unrestricted free trade)
Theories:
1. Mercantilism: country’s best is to maintain a trade surplus and trade is zero-sum => gov should intervene 2. Adam Smith’s absolute advantage: a country has when it’s more efficient producing one product than any other country => specialize in advantage goods 3. David Ricardo’s comparative adv: (ass. Resources move freely within a country, constant returns to scale, stock of resources or efficiency unchanged) One country has absolute adv. in all goods => should specialize in goods they produce most efficiently and buy less efficiently even they could produce more efficiently
But not always benefit do in fact immobile resources, diminishing returns, dynamic effects and growth * Paul Samuelson: free trade result in lower wages in rich country + offshore service job cause migration 4. Heckscher-Ohlin theory: (ass. tech is the same)comparative adv. arise from dif. in factor endowment (not just labor productivity like Ricardo) => export goods that use what is abundant, import goods use what is scarce
But Leontief paradox: U.S exports less capital intensive than imports du they are relatively capital abundant 5. Vernon’s Product life cycle theory(good before but less today do the theory is ethnocentric, production is dispersed globally, and product can go to multiple markets cug luc): as product mature, location of sales and
Chapters review
Chapter 5
Free trade: government not try to influence through quotas or duties what can be bought from/sold to other country
Benefits: -Smith, Ricardo and heckscher Ohlin predict that the consequences of fee trade include both static economics gain (because free trade supports a higher level of domestic consumption and more efficient utilization of resources) and dynamic economic gains (because free trade stimulates economic growth and the creation of wealth) * Free trade benefit even when it can produce itself (promote unrestricted free trade)
Theories:
1. Mercantilism: country’s best is to maintain a trade surplus and trade is zero-sum => gov should intervene 2. Adam Smith’s absolute advantage: a country has when it’s more efficient producing one product than any other country => specialize in advantage goods 3. David Ricardo’s comparative adv: (ass. Resources move freely within a country, constant returns to scale, stock of resources or efficiency unchanged) One country has absolute adv. in all goods => should specialize in goods they produce most efficiently and buy less efficiently even they could produce more efficiently
But not always benefit do in fact immobile resources, diminishing returns, dynamic effects and growth * Paul Samuelson: free trade result in lower wages in rich country + offshore service job cause migration 4. Heckscher-Ohlin theory: (ass. tech is the same)comparative adv. arise from dif. in factor endowment (not just labor productivity like Ricardo) => export goods that use what is abundant, import goods use what is scarce
But Leontief paradox: U.S exports less capital intensive than imports du they are relatively capital abundant 5. Vernon’s Product life cycle theory(good before but less today do the theory is ethnocentric, production is dispersed globally, and product can go to multiple markets cug luc): as product mature, location of sales and