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February 2 MOS Lecture

February 2 MOS Lecture - markets and knowledge Product Life...

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February 2 Lecture Mercantilism: - Countries should simultaneously encourage exports and discourage imports o The flaw was that it is viewed as a zero-sum game (winners and losers) – pretty unhappy people, countries, and businesses o Is this present today? Absolute Advantage: - When a country is the best at producing everything (compared to others) Comparative Advantage: - Theory that a country should specialize in producing a product that can do so most efficiently Heckscher-Ohlin Theory: - Take advantage of the things you have a lot of, and import the things you don’t have a lot of o USA – a lot of skill and knowledge, exports are typically financial
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Unformatted text preview: markets and knowledge Product Life Cycle:-Raymond Vernon’s theory – early in the life cycle of a typical new product, while demand is starting to grow rapidly in the US, demand in other advanced countries is limited to high-income groups New Trade Theory:-Emerged in the 1970’s, economists arguing that increasing returns to specialization might exist in some industries-Economies of Scale o Represent one particularly important source of increasing returns o Economies of scale are unit cost reductions associated with a large scale of output...
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