International Trade Simulation Essay

In the International Trade simulation, you are the Trade Representative of a small country called Rodamia. You are introduced to international trade--the theory of comparative advantage and the impact of tariffs, quotas, and dumping on international trade (Applying International Trade Concepts, 2003). In the first segment, it is your job to evaluate what products to produce within the country and what products to import based on the Production Possibility Frontier (PPF). Due

Some Major benefits of international trade include the reduction of poverty, expansion of business opportunities for local companies and reduces costs for consumer.

The growth rate of the U.S GDP stands at 3.23 percent from 1947 up to 2016(Cuñat & Melitz, 2012). In the international trade, the absolute advantage indicates the ability of the economy to conduct tasks appropriately. The comparative advantage identifies the economy, which produces the goods with the lowest opportunity cost.

Trading is very important economic factor. Trade between different countries depends upon different factors. There are some factors due to which bilateral trade between two states is enhanced. On contrary, there are some factors which restrict or reduce the trade between two countries (Meyer, 2011). Factors which enhance trade include different cultural, political, geographic and economic aspects which are common between the 2 countries involved in bilateral trade with each other. While trade is reduced or restricted, if two countries are completely different culturally, politically, geographically and economically (Siegel, 2011). For example, trade between two countries, having common boarder, currency, per capita income et cetera, will be lot more high than those countries which do not share these factors common with each

Absolute advantage is the ability to produce more than one product efficiently and at the lowest cost. Comparative advantage is the ability to specialize in producing one product at the lowest cost. Comparative advantage affects trade the most because with specializing in producing one product the companies must trade to receive other products. Comparative advantage also considers the opportunity of cost to produce one product verse the other.

Trade between nations of the world is extremely important in many aspects such as keeping a strong relationship between countries and to hold a good strong trust. It is through trade that

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 would set the tariff at $40/unit, because even though the tariff raises the price of the product and can lead to loss in consumer surplus, some of this loss is compensated by a gain in the government's revenue from the tariff. This leads to a lower deadweight loss as compared to what happens with a quota. This tariff is 25% of the export price which is equal to the dumping margin. As the price of watches increases because of the tariff, imports from Suntize decline to 2.00 million units and domestic production increases to 6.00 million units.

One of the most powerful propositions of classical trade theory is that the pattern of international trade is determined by comparative advantage. That is, a country with the comparative advantage in a given commodity exports, and the other with the comparative disadvantage imports. Adam Smith has founded the comparative advantage originates theory, and there have been numerous attempts to identify the economic conditions that determine comparative advantagelet us began with Adam Smith theory, and then we will discuss one correction of this theory was founded by Palley’s (2008), which is an observation the modern view of comparative advantage.

According to Rittenberg Libby & Tregarthen Timothy (2009), when a country is more productive and efficient at making a product than any other country, it is said to be having an absolute advantage. In other words, For example, when we say China has an absolute advantage regarding the production of rice, this means that China can produce rice more efficiently and with a reduced marginal cost, which is the cost of producing one more of the product. Therefore, the lower marginal cost occurs due to a number of different advantages such as cheaper labor or materials. When a country has an absolute advantage over another, they specialize, or devote all of their resources into

International trade is the exchange or trade of merchandise, capital and services across the world. For many countries, these exchanges can represent a very important share of their GDP (Gross Domestic Product).

While this demonstrates that the United States has an absolute advantage in services, this is neither a necessary nor a sufficient condition for determining comparative advantage. For this determination, the industry ratios are also required. The competitive advantage of any industry depends on both the relative productivities of the industries and the relative wages across industries.

Economists use the term absolute advantage when comparing the productivity of one person, firm or nation with that of another. The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good (Gans, King, & Mankiw, 1999).

The concept of absolute advantage is one of the most fundamental areas of concern in the study of economics. In its basic meaning, absolute advantage refers to the ability of one individual or party to produce more of a particular good or service than other competitors given the same amount of resources. In this regard, absolute advantage becomes a very important aspect in the concept of international trade as it clearly defines the different areas where countries should specialize in order to maximize their productivity and enhance international trade. The principle of absolute advantage was first elucidated by Adam Smith in his study of international trade using labor and capital as the only factor inputs(Free, 2010).

This report discusses international trade for the country of Rodamia. The report talks about advantages and limitations of trade, and also comparative and absolute advantage. The report also discusses influences that affect foreign exchange rates.