Questions : 1) How does Ricardo explain Comparative Advantage? 2) What happened to Ed´s grandchild before trade? 3) What happened to Ed´s grandchild after trade? Answers: 1)Ricardo explains Comparative Advantage in “The Choice” as followed: Dave gives “The Theory of Comparative Advantage” a different name and calls it “The Roundabout Way to Wealth”.(p.10) He says that this theory deals with the idea that even a nation which is relatively poor at doing everything, still do some things relatively well. “And a nation that is really good at many things should still specialize in producing some items and import the rest”.(p.10) Time is the ultimate scarce resource. Investing time in doing something means having less time in doing
Figure 2 : Fiscal Deficit and Trade Deficit (2003-2008) Source : IMF, General Statistics Office of Vietnam C.Impact on Trade The global financial crisis has affected severely on Vietnamese exports. After joining the WTO, Vietnam’s trade has become depend on global
Question Five Define the concept of comparative advantage. How can a country gain or lose its comparative advantage in the production of a good?
Comparative advantage in economics is when a country can produce a good at a lower opportunity cost relative to other producers. It is because of this theory that output will increase because a producers within a country specializes Countries will gain the ability to maximize their efficiency and their labor force which facilitates mass-production of products, resulting in higher profits and international trade. This is because the economies of scale reduces overall cost, by producing more units. If the two countries moved towards protectionism and attempted to become self-sufficient then the production of goods would then
2. What are the essential arguments in favor of free trade and against free trade? Favor Free Trade - Law of comparative Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.
Case Study A suitable alternative title for the case could be: NT cattle exporters gain confidence from China. A recent study (Department of foreign affair and trade, 2014, p.4.) shows that almost half of Australia’s exports came from minerals and fuels with 49.3% in 2013, especially iron and coal. Followed by
Introduction Since the 2008 financial crisis, economists have been blamed for their incapability to predict the collapse of the financial system with economic models. It has been widely debated about the role of economic models, in particular their underlying assumptions and their ability to predict the upcoming events. Colander et al
Introduction In the recent years, business become more larger due to the advancement of technology, a renewed enthusiasm for entrepreneurship and a global sentiment that favors international trade to connect people, business and market. The economist emphasize about the international trade can increase the production of goods and service, increase the demand from the consumer in local or international, the diversification of goods and services and the stability in the supply and prices of goods and services. As a result, it becomes the main part of the international business and motivated countries to trade with borders. The United States implied the government intervention since the great depression through the financial sector rescue
Apart from foreign direct investment exports has been one of the determinants of upholding higher economic growth, better schooling and life expectancy due to their assimilation in the world economy. Developing countries can enlarge their markets by allowing firms exporting and achieving economies of scale. Exporting is one of the
a. How does the theory of comparative advantage explain why a developed country such as the USA might wish to trade with a developing country such as Vietnam? 
Vietnam is a densely populated developing country in the Southeast Asia. Since independence in 1975, though launching of several economic reforms and extensive efforts for macroeconomic stability, infrastructure development and environmental sustainability, Vietnam has transformed from one of the poorest country in the world to a lower middle income country with current GDP of $186.2 billion (Tradingeconomics, 2016). During the past two decades, Vietnam has become one of the leader in agricultural sectors and a foreign investment attractive destination. The country has had made impressive progress with GDP growth of 5.5 percent in 1990s to 6.4 percent in 2000s, making Vietnam one of the fastest growing countries in the world and it is expected to be more strengthen in the near future (World Bank [WB], 2016). Recently, the nation has concluded the Trans-Pacific Partnership (“TPP”) free trade agreement negotiation along with other 12 nations, which create more opportunities for the country to integrate into regional and global economies. This essay will briefly discuss about Vietnam’s economic transformation in general and particularly with its trading pattern in the past two decades.
Discussion Considering that absolute advantage is determined by the comparison between the productivities of labor, it is therefore possible that one party can be disadvantaged to have no absolute advantage in anything. In such a case, it is normally realized that no trade can occur between such a party and other parties. Absolute advantage is normally contrasted with the theory of comparative advantage which means that one party has the ability to produce a particular good or service cheaply or at a lower opportunity cost. In any case, the two theories rely on the basic concept of economic advantage which refers to the ability of one group or party to realize the same output with more economy than another party.
This study was conducted to (a) determine which market is the most dynamic for Thai exports, (b) measure the intensity of trade between Thailand and its regional trading partners and (c) test whether the modified Revealed Comparative Advantage (RCA) index, which was developed based on the gravity trade model, is applicable for measuring Thailand’s competitiveness resulting from its border trade policy. The RCA index is typically applied based on three conceptual points. First, the trade balance index (TBI) can be used to indicate whether GMS countries are net exporters or importers. Second, the trade balance is typically decomposed by product and country (i.e., bilateral trade balance). Relevance refers to the degree of concentration of trade imbalances
Comparative advantage is a principle developed by David Ricardo in the early 19th century to explain the benefits of mutual trade (Carbaugh, 2008). Many underlying assumptions of comparative advantage depend on states of economic equilibrium and an absence of economy of scale. In reality, economies are dynamic and subject to innovation and interference; which has led to revised assumptions of return and competition (Krugman, 1987). These factors have created questions of free trade and governmental participation in an economy by the development of strategic trade policies. These new concepts do not replace the theory of comparative advantage; however, they further explain how trade can benefit a country's economy (Krugman, 1987).
Abstract Vietnam has achieve notable export success in its textile and garment industry over the past decade. However, it still received many subsidies from the government, especially export subsidies which is prohibited in the international trade once Vietnam has been an official member of WTO. It is textile and garment industry that is one of the most difficult problem in negotiation process of bilateral agreement with US. So for such a dependent-on-government industry like textile and garment industry, what would happen after removing all preferences ? Whether they could survive ? What should they do to gain benefits in such a fierce competition after WTO accession ? That is the purpose of our paper. We hope that this paper con give