International Trade Discussion Questions (Essay Sample)

International trade discussion questions
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International trade discussion questions
1.Explain how the United States, being a large economy with an abundance of natural resources, labor, and capital, can benefit by not being in autarky.
Autarky refers to a situation where the country closes its borders and does not in any way benefit from other countries (Allard and Serrano, 2016). The United States can benefit from not being autarky since the country can receive various forms of benefits from other countries not necessary from this their own.
2) It was shown in the video that the United States had the comparative advantage in burgers. Using the table below, show and explain how Mexico has the comparative advantage in phones.

Mexico

United States

Possibility

Burgers

Phones

Burgers

Phones

A

6

0

12

0

B

4

8

8

8

C

2

16

4

16

D

0

24

0

24

Mexico produce phones at a relatively lower cost that in the United States. In Mexico, it takes a single burger to produce four phones while in the United States it takes one burger to produce two phones.
Mexico = 6/6 = 24/6 United States = 12/12 = 24/12
1 burger = 4 phones1 burger = 2 phones
3) From your answer in the previous question, what is the opportunity cost of burgers for the United States, i.e. how many burgers must the United States give up to produce one phone? What would be an agreeable terms of trade for 1 phone?
The opportunity cost is 1 burger is equals to two phones. To make it for one phone, half burger = 2/2 phones which makes it half burger equals one phone.
The agreeable terms of trade would be 1 phone: 1/3 burger. United States receive no more than half burger and Mexico to receive no less than a quarter burger.
4) At the end of the video, a supply and demand graph of the phone market for both countries was shown. Explain why Mexico exported phones to the United States.
Mexico exported phones to the United States since it has a surplus of twelve phones.
5) Suppose, the market for burgers was shown rather than the market for phones in th