study_guide_28-123[2] - 1. Describe the principle of...

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1. Describe the principle of comparative advantage. What were (are) its strengths and weaknesses as a justification for free trade? 1. Countries should do what they do best relative to other things they do. IT applies the principle of specialization to countries. Trade protection is never beneficial to economy as a whole. Thus, there are clear free trade implications 2. Free trade induce a country to follow its comparative advantage and is the best possible policy. 2. What does the principle of “infant industry” protection mean? 1. British protecting their American counterpart industries via trade protection 2. Americans were very protective, more so than their German and Japanese counterparts 3. National manufacturers with protection from foreign industries could charge domestic prices above world levels and earn very high profits. 3. Why was economic development in “areas of recent settlement” so successful in the late 19 th century? 1. The areas of exploration held natural resources whose extraction did not become economically feasible until the recent exploration, migration, and technological change. 2. Not only new regions were excavated, but already known regions such as the Great Plains and Australian outback that could not have possibly been exploited were now able to be due to new technology 3. The extraction of these resources helped countries grow richer 4. Resource booms quickened industrial growth 5. Local institutions assisted (with property rights) which helped promote stability through legal actions. 6. Advantages of temperate climates and fertile land that helped suit farming and ranching. 7. Sparsely settled societies were flocked to by immigrants which helped build up these regions (Latin America) 4. Describe the different effects sugar and cotton, on one hand, and coffee and rice, on the other, had on tropical societies. 1. Sugar and cotton were “reactionary” crops, while coffee and rice were “progressive” crops 2. Sugar and cotton were farmed with gang labor 1. Large farms were more efficient than small ones, and small ones couldn’t compete with plantation owners 3. Coffee and rice were ideal smallholder crops. 1.
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study_guide_28-123[2] - 1. Describe the principle of...

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