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19 download_doc-14.php - G202 Topic6: o o o o...

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G202 (3/9/2009) Topic 6: Political Economy of Trade o REQUIRED READINGS:      “The Chiquita Case” o Online Chiquita Case Discussion: March 22 nd —March 24 th     o In-class Chiquita Case Debriefing: March 25 th       When to Export o When the world price is above the domestic price, the domestic industry  has the comparative advantage. The domestic industry exports to the world. o Exports enhance the welfare of the domestic country because: Producer surplus increase more than consumer surplus decreases  Exports Graphically o Before Trade (P     US ): CS = ABC PS = EF o After Trade (P     W ): CS = A PS = BCDEF o Gains from Trade:     D When to Import o When the world price is below the domestic price, foreign producers have  the comparative advantage. The domestic industry imports from the world. o Imports enhance the welfare of the domestic country because:
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