Essay on International Business

750 Words Feb 27th, 2014 3 Pages
• Part I - Midterm
Ch 1 1. Does exposure to competition with the world leader in a particular industry improve a firm's productivity? Discuss in detail by providing sound arguments to support your choice of response. A world leader is ac company which can own the maximum market shares or which can have a market position because of the part of the services or the products. Now if the new comer or any other company bench mark itself against the work leader consequently it will try to improve the efficiency and productivity in comparison to principal company which ultimately enhances the company’s performance. 2. What are the essential arguments in favor of free trade and against free trade? Favor Free Trade
- Law of comparative
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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.
I believe comparative advantage is the most consistent way of measuring gains from international trade. The reason is both countries can gain from trade if both country work toward an equilibrium. Ch 3 4. Explain how immigration and trade may worsen wage inequality, and how college education may mitigate against that.
Increased trade could worsen income distribution across the world. When you bring in immigrants into countries the low-skill labor force grows and if Trade tends to increase the demand for skilled workers relative to unskilled workers, thus worsening wage inequality. Immigration of unskilled workers decreases the supply of skilled workers relative to unskilled workers, thus worsening wage inequality. Alternatively, college education increases the supply of skilled workers relative to unskilled workers, thus reducing wage inequality 5. How does Staffan Linder explain world trade patterns? To what extent is his concept applicable to

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