07 -- International Trade

07 -- International Trade - CPA BEC STUDY UNIT 7...

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CPA BEC - STUDY UNIT 7 International Trade: Core Concepts A. Advantages of International Trade 1. Under the concept of comparative advantage , total world output will be maximized when each nation specializes in the products in which it has the lower opportunity costs , that is, a comparative advantage. When nations specialize in what they produce most efficiently and then exchange with others, more is produced and consumed than if each nation tries to be self-sufficient. Comparative advantage compares costs within a single country. a. Absolute advantage compares the costs of inputs between countries. Thus, a given country might have an absolute advantage with respect to every product compared with a specific other country. A nation will export goods for which it has a comparative advantage and import goods for which it has a comparative disadvantage. B. Trade Barriers 1. Even though individuals (as a whole) are best off under free trade , governments often block or restrict the importation of certain products, encourage exports, or even restrict exports. Protectionism
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This note was uploaded on 08/29/2010 for the course CBEAM BEC taught by Professor Gleim during the Spring '10 term at De La Salle Lipa.

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07 -- International Trade - CPA BEC STUDY UNIT 7...

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