26-class notes - TODAY class 26 Nov 13 Causes of...

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1 TODAY – class 26 – Nov 13 • Causes of International Trade (continued) – finish Comparative and competitive advantage • Brander (8, pp 159-166) Mon Nov 16: Debate 3 – local consumption of food Wed Nov 18: cont. trade (for 101,102 – Debate 4 moved to Wed for section 103) – Increasing returns: history of trade policy - importance of the Auto pact; Improvements in communication and Comm394- Barbara Spencer of the Auto pact; Improvements in communication and lower trade costs – Outsourcing • Brander (8, 166-169); Brander (9, 185–190) Friday Nov 20 – Debate 4 –bailout of GM & Chrysler (sections 101,102) Location Final Exam December 15: 8:30 am; Scarf 100 Scarf – Education building, 2125 MAIN MALL
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2 Comparative advantage • Defn: A country has a comparative advantage in the production of X if the opportunity cost of producing X is lower in that country than in other countries. – Countries export those products that they are relatively good at producing as determined by comparative advantage . – Idea due to David Ricardo (1807) Competitive Advantage Competitive advantage (for a firm): the ability to produce a product of given quality at lower cost than its international rivals. – What is the effect on competitive advantage of • higher domestic wages? • a decrease in the value of the domestic currency? – E.g. CAD falls from $1 USD to $0.85 USD. – Firms that have a competitive advantage are able to export.
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3 Example: Competitive Advantage Output per worker per week Manufacture Assembly Manufacture Canada 2 2 Fiji 1/2 1 FAST- TEST – layoffs and hiring are possible What is the productivity of Fiji relative to the productivity of Canada in assembly? productivity of Canada in assembly? ……………. Assembly will take place in Fiji provided the Fijian
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This note was uploaded on 02/14/2010 for the course COMM 296 taught by Professor Dasgupta during the Fall '08 term at The University of British Columbia.

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26-class notes - TODAY class 26 Nov 13 Causes of...

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