man372wa4 - International Trade with the United States and...

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International Trade with the United States and Asia 1 International Trade with the United States and Asia Thomas Baker August 29, 2010 MAN-372 Professor Cheryl Toops
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International Trade with the United States and Asia 2 Why do countries trade? Shouldn't a strong country such as the United States produce all of the computers, television sets, automobiles, cameras, and VCRs it wants rather than import such products from Japan? Why do the Japanese and other countries buy wheat, corn, chemical products, aircraft, manufactured goods, and informational services from the United States? Because countries have different natural, human, and capital resources and different ways of combining these resources, they are not equally efficient at producing the goods and services that their residents demand. The decision to produce any good or service has an opportunity cost, which is the amount of another good or service that might otherwise have been produced. Given a choice of producing one good or another, it is more efficient to produce the good with the lower opportunity cost, using the increased production of that good to trade for the good with the higher opportunity cost. When a country can produce more of a good with the same resources that another country can, it is said to have an absolute advantage in the production of that good. If the second country has an absolute advantage in producing a good that the first country wants, both will be better off if they specialize and trade. But trade is usually beneficial to both countries even if one has an absolute advantage in the
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This note was uploaded on 10/16/2011 for the course MANAGEMENT 301 taught by Professor ?? during the Spring '10 term at Thomas Edison State.

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man372wa4 - International Trade with the United States and...

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