tailieunhanh - Lecture Economics (18th edition): Chapter 37 - McConnell, Brue, Flynn's

Chapter 37 - International trade. After completing this unit, you should be able to: Comparative advantage and the gains from trade, exports and imports, economic effects of tariffs and quotas, arguments for protectionism. | International Trade Chapter 37 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Comparative advantage and the gains from trade Exports and imports Economic effects of tariffs and quotas Arguments for protectionism 37- Some Key Facts . trade deficit in goods $815 billion in 2007 . trade surplus in services $107 billion in 2007 Canada largest . trade partner Trade deficit with China $257 billion in 2007 Exports are 12% . output Dependence on oil 37- World Exports Germany United States China Japan France Netherlands United Kingdom Italy 0 2 4 6 8 10 12 Source: World Trade Organization Percentage Share of World Exports, Selected Nations, 2007 37- Economic Basis for Trade Nations have different resource endowments Labor-intensive goods Land-intensive goods Capital-intensive goods 37- Comparative Advantage Assumptions Two nations Same size labor force Constant costs in each country Different costs across countries . absolute advantage in both Opportunity cost ratio Slope of the curve Coffee sacrificed per ton of wheat 37- Coffee (Tons) 30 25 20 15 10 5 0 35 40 45 5 10 15 20 25 30 Wheat (Tons) Coffee (Tons) 30 25 20 15 10 5 0 35 40 45 5 10 15 20 Wheat (Tons) (a) United States (b) Brazil 12 18 8 4 A B Comparative Advantage 37- Self-sufficiency output mix Specialization and trade Produce good with lowest domestic opportunity cost Opportunity cost 1 ton wheat 1 pound of coffee in . 2 pounds of coffee in Brazil Comparative Advantage 37- Terms of trade . 1W = 1C . will sell 1W for more than 1C Brazil 1W = 2C Brazil will pay less than 2C for 1W Settle between the two Depends on supply/demand factors Assume 1W = Comparative Advantage 37- Gains from trade Trade possibilities line Slope equals terms of trade Improved options Complete specialization More of both goods More efficient resource allocation Comparative . | International Trade Chapter 37 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Comparative advantage and the gains from trade Exports and imports Economic effects of tariffs and quotas Arguments for protectionism 37- Some Key Facts . trade deficit in goods $815 billion in 2007 . trade surplus in services $107 billion in 2007 Canada largest . trade partner Trade deficit with China $257 billion in 2007 Exports are 12% . output Dependence on oil 37- World Exports Germany United States China Japan France Netherlands United Kingdom Italy 0 2 4 6 8 10 12 Source: World Trade Organization Percentage Share of World Exports, Selected Nations, 2007 37- Economic Basis for Trade Nations have different resource endowments Labor-intensive goods Land-intensive goods Capital-intensive goods 37- Comparative Advantage Assumptions Two nations Same size labor force Constant .