Assignment 2

Assignment 2 - country benefit from opening to trade What...

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INR 2002 Assignment C 1. What is the difference between comparative advantage and absolute advantage? How does comparative advantage lead to trade? -Absolute advantage is the ability to produce a good at a cheaper production cost then the competitor. Comparative advantage is the relative efficiency with which a particular product is produced when comparing the production rates of multiple countries. Comparative advantage reveals what is best for the entirety of the world in terms of total produces units. 2. What are the factors of production? When factors are mobile, what groups within a country benefit from opening to trade? What groups are hurt? (Think in terms of factors.) What pattern of politics emerges? -The factors are land, labor, and capital. The groups that benefit are the ones with strong production of the efficient factor and the groups that are hurt are the labor in richer countries and poor capital owners. 3. Why does factor mobility matter? When factors are not mobile, what groups within a
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Unformatted text preview: country benefit from opening to trade? What groups are hurt? What pattern of politics emerges?-Without mobility then the people working in that industry are out of luck because they have little to no skill in another factor. There are class conflicts because factor-based coalitions form to rally for protectionism. 4. What are the functions of the International Monetary Fund and World Bank? -They help govern forms of economic interaction that are not trade. Regulating trade is done by the WTO and regional organizations. 5. Does compliance with international law indicate that international law alters behavior? Explain. -Not necessarily. International organizations create international laws that are compromises amongst countries. The leaders of such organizations know that for a law to be successfully implemented it must not rely on a drastic change of behavior. If a country has to change their behavior they won’t want to do it....
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