product of labor shown below. Home Foreign Baseball bats 1/6 1 tennis rackets 1/2 1/4 (a) What is the opportunity cost of rackets in terms of bats for the Home country? for the Foreign country? (b) In which good does Home have the comparative advantage? why? (c) At world equilibrium with trade‚ what do you know about the relative price of tennis rackets? (d) Assume that tennis rackets trade for bats on world markets at an equlilbrium price of PR =PB = 2. Why will each country specialize? at what
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Fremont) 2. Use the theory of comparative advantage to explain the way in which Logitechhas configured its global operations. Why does the company manufacture in Chinaand Taiwan‚ undertake basic R&D in California and Switzerland‚ design products in Ireland‚ and coordinate marketing and operations from California?Comparative advantage‚ as proposed by Ricardo‚ says that it is beneficial for nations to involve in trade even when there is absolute advantage for them to produce all the goods. So nations
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exports the product to other developed countries. In the standardized product stage‚ production moves to developing countries‚ which then export the product to developed countries. The model demonstrates dynamic comparative advantage. The country that has the comparative advantage in the production of the product changes from the innovating (developed) country to the developing countries. Product life-cycle There are five stages in a product’s life cycle: Introduction Growths Maturity
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Trade Theories Paper University of Phoenix Global Business 381 Debra Patterson December 20‚ 2010 Professor Bobbie Murray Absolute Advantage: General Theory: Absolute advantage theory addresses when a country has multiple products. “According to theory of absolute advantage‚ a country has an absolute advantage over the others if it is able to produce more of a product or service with the same number of resources or the same number of a good or service with fewer
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than that country would have the comparative advantage. Having this soil means that the farmers have to fertilize their fields less‚ the corn grows quicker‚ and it tastes better making corn their main crop and main export leaving little room for them to produce cheese. But cheese is still a necessity so this country must trade some of its corn for cheese this is their opportunity cost. If there is a neighboring country that has the comparative advantage on cheese these two countries could easily trade
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Troy in terms of 1 ship. . 8. Based on your answer to question 7‚ which country should specialize in the production of which good? Why? Athens’ MRT=0.66 and Troy’s MRT=2. So we can know Athens has comparative advantage in ship‚ and Troy has comparative advantage in food. Thus‚ Athens should specialize in the production of ship‚ and Troy should specialize in the production of food.
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to advance trade theory beyond David Ricardo’s static framework of comparative advantages. In 1817‚ Ricardo came up with a simple economic experiment to explain the benefits to any country that was engaged in international trade even if it could produce all products at the lowest cost and would seem to have no need to trade with foreign partners. He showed that it was advantageous for a country with an absolute advantage in all product categories to trade and allow its work force to specialise in those
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The theory of comparative advantage is perhaps one of the most important concepts in international trade theory. A country has an absolute advantage in the production of a good relative to another country if it can produce the good at lower cost or with higher productivity. Absolute advantage compares industry productivities across countries. In the case of Zambia‚ for instance‚ the country has an absolute advantage over many countries in the production of copper. This occurs because of the existence
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used in the mechanism of a bicycle. Between the simple machines and complex assemblies‚ several intermediate classes can be defined‚ which may be termed "compound machines" or "machine elements". The mechanical advantage of a compound machine is simply the product of the mechanical advantages of the simple machines of which it is composed. There are six types of simple machines ------------------------------------------------- Inclined plane An inclined plane is a board or other flat surface
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ECONOMICS PROJECT NEW TRADE THEORY: CONTRIBUTIONS OF PAUL KRUGMAN Paul Robin Krugman‚ born February 28‚ 1953 is an American economist‚ Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University‚ Centenary Professor at the London School of Economics‚ and an op-ed columnist for The New York Times. In 2008‚ Krugman won the Nobel Memorial Prize in Economics for his contributions
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