lec03-eco101-11

lec03-eco101-11 - InternationalTrade Lecture3 c ⃝...

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Unformatted text preview: InternationalTrade Lecture3 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego September29,2011 3.MultipleGoodsandMultipleFactorsofProduction Econ101, c ⃝ M.Muendler GainsfromTradeintheRicardianModel • Thegainsfromtradecanbeunderstoodindifferentways – Tradeislikeanadditionalproductiontechnology (tradeallowstotransformdomesticexportsintoforeignimports) – Tradeexpandstheconsumptionpossibilityfrontierbeyondthe productionpossibilityfrontier (tradeallowstoexchangedomesticgoodsontheworldmarketat betterrelativepricesthanonthedomesticmarket) 3.MultipleGoodsandMultipleFactorsofProduction Econ101, c ⃝ M.Muendler ProductionPossibilityFrontiersandtheTradePattern Q C ,Q C Home and Foreign cheese production H o m e a n d F o r e ig n w in e p r o d u c t io n L/ a LC L/ a LW a LC / a LW L / a * * LC L / a * * LW a * LC / a * LW PP C W / in world trade equilibrium 1 PP C W / 1 PP C W / 1 Q W ,Q W * * 3.MultipleGoodsandMultipleFactorsofProduction Econ101, c ⃝ M.Muendler MisconceptionsaboutComparativeAdvantage • Misconception1:“Freetradeisonlybeneficialifacountryisproduc- tiveenoughtocompete.” No.Tradeisbeneficialifthereisacomparativeadvantage.Absolute disadvantagedoesnotmatter. • Misconception2:“Freetradeisunfairandhurtsifitisbasedinlow- wagecompetition.” No.Tradeisbeneficialifthereisacomparativeadvantage.Absolute wagesdonotmatter. 3.MultipleGoodsandMultipleFactorsofProduction Econ101, c ⃝ M.Muendler MisconceptionsaboutComparativeAdvantage • Misconception3:“Freetradeworsensthelotofworkersinlow-wage countries.”countries....
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This note was uploaded on 01/30/2012 for the course ECON 101 taught by Professor Jacobson during the Fall '03 term at UCSD.

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lec03-eco101-11 - InternationalTrade Lecture3 c ⃝...

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