Week 5 Team Paper - INTERNATIONAL TRADE 1 Running head:...

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INTERNATIONAL TRADE 1 Running head: International Trade International Trade Team C April 19, 2010 ECO/212 James Kirk University of Phoenix
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INTERNATIONAL TRADE 2 International Trade Introduction International trade benefits everyone involved because it is a way to make money. Even though international trade has its benefits, it can also have its disadvantages too. In international trade there are imports and exports from each country, there are tariffs on the goods and there are also have policies put together by the government. There is an organization known as the World Trade Organization that helps set rules and regulations. One Advantage and one Limitation of International Trade as Identified in the Simulation One advantage of International Trade as identified in the simulation comparative advantage, with comparative advantage the policy makers in a country can compare opportunity costs of domestic versus foreign products and can make an educated decision on which goods would be advantageous to import or export. One limitation of International Trade as identified in the simulation is the dumping of goods, in the simulation it is the dumping of watched from Suntize to Rodamia, which hurt the domestic sales of watches. Key Points from the Reading Assignments That Were Emphasized in the Simulation Imports, exports, tariffs, and trade policies were four key points discussed in the readings and emphasized in the simulation. Imports are goods produced in other countries and sold domestically here in the United States. Exports are goods produced domestically and sold to other countries (Mankiw, 2007). A country can produce or manufacture a certain good in large quantity as wheat but cannot produce enough corn to meet its needs. This country can sell or
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INTERNATIONAL TRADE 3 export wheat to another country that cannot produce wheat and in return buy or import corn that the other country has in abundance. Both countries can meet its needs. A tariff is a tax on goods produced abroad and sold domestically (Mankiw, 2007). Under free trade domestic price equals world price, but when a tariff or tax is added the price of that good goes up and goes up above the world price. The change in price affects the behavior of domestic buyers and sellers and because the tariff raises the price of the good, it reduces the domestic quantity demanded and raises the domestic quantity supplied. A trade policy by definition is a government policy that directly influences the quantity
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Week 5 Team Paper - INTERNATIONAL TRADE 1 Running head:...

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