International Trade Simulation and Report
Taruh Cravens, Melody Jones, Geneva George-Williams, Ruby Morgan, Nicole Southerland
ECO/212
Blake Bennett
International Trade Simulation and Report
This paper is a team correlation on the knowledge gained from our course of study and how the concepts are applied, how international trade affects the U.S, economy, and addresses the four key factors from our weekly reading assignments that are shown in the stimulation.
The simulation identified Rodamia’s bordering countries provide an opportunity for international trade and investments that could greatly benefit Rodamia. International trade with other countries would give ...view middle of the document...
2. The principle of increasing marginal opportunity cost says to receive more of something and individual or country has to give up a constantly increasing amount of something else (Hubbard and O’Brian, 2010). Comparative advantage allows better efficiency of inputs and increased outputs than a country could accomplish alone. An example would be Rodamia produces more cheese and DVDs because resources formally used to produce corn and watches are Currently used to increase productivity of cheese and DVDs for export.
3. The production possibility curve is a curve used to measure the largest amount of outputs attainable by a certain number of inputs (Hubbard and O’Brian, 2010). Rodamia evaluates how much cheese and how many DVDs can be produced using the same resources using the production possibility curve.
4. Limitations on international trade such as tariffs, quotas, and regulations may prevent trading between countries (Hubbard and O’Brian, 2010). If Rodamia enacts tariffs on corn imported from Uthania, the return for Uthania may not be sufficient for comparative advantage therefore Uthania will sell their corn elsewhere. Trade restrictions in certain circumstances act as trade representatives to protect firms and individuals (Internationalecon.com, 2010).
Absolute and Comparative Advantage. Each country can develop products as long as their environment and production conditions will allow benefits from a trade involving exports with imports. Absolute advantage shows the difference in measuring the labor productivity of the product that can be produced more efficiently with contrast of other products the country can produce using the same resources. Two methods can help in the rational of measuring each products produced. One way is using the number of units of output in one hour of labor or number of hours it takes to produce one unit of output. The product that produces at a better efficient level with less productivity cost is the product for trade. According to Pugel (2003), to weigh the better option for trade one would need to think “who has the absolute advantage for beneficial trade”?
Comparative advantage has the power to analyze the opportunity cost given up for the production of one product to the other as long as both countries gain from a trade. In comparing the two commodities of corn and cheese, we were shown the comparison of the benefit by reducing production on cheese and the quantity change in a bushel of corn (University of Phoenix, 2004). While the two products can be produced in the same country, one had evidence that if compared value per unit and per hour of labor corn had the comparative advantage over cheese. Reducing the labor from producing cheese to enhance the labor in producing one more bushel of corn had a higher productivity level at a lower opportunity cost. According to Pugel (2003), a country will export goods that it can produce at a low opportunity cost and import goods that it...
