ch02foundations of modern trade theory(国际经济学浙江林学院,岑丽娟)

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,International Economics,By Robert J. Carbaugh8th Edition,Chapter 2:,Foundations of Modern Trade Theory,Historical development of trade theory,Mercantilism,positive trade balance,Absolute advantage,(Adam Smith),Countries benefit from exporting what they make cheaper than anyone else,Comparative advantage,(David Ricardo),Nations can gain from specialization, even if they lack an absolute advantage,Foundations of trade theory,2,Absolute & Comparative Advantage,Comparative advantage,Absolute advantage: each nation is more efficient in producing one good,Output per labor hour,Nation,Wine,Cloth,United States5 bottles20 yards,United Kingdom15 bottles10 yards,Comparative advantage: the US has an absolute advantage in both goods,Output per labor hour,Nation,Wine,Cloth,United States40 bottles40 yards,United Kingdom20 bottles10 yards,3,Ricardos Comparative Advantage in money prices,Comparative advantage,Cloth(yards)Wine(bottles),Nation,Labor,Wage,Quant. PriceQuant.Price,US1 hr$20/hr40$0.5040$0.50,UK1 hr5/hr100.50200.25,UK1 hr$810$0.8020$0.40,(at $1.6 = 1),4,Production possibilities schedule,Generalizes theory to include all factors, not just labor,Shows combinations of products that can be made if all factors are used efficiently,Slope, or,marginal rate of transformation, shows the,opportunity cost,of making more of one good (how much of one good must be given up to make more of another),Comparative advantage,5,Marginal Rate of Transformation,Comparative advantage,6,Production possibilities schedules: constant opportunity costs,Comparative advantage,7,Supply schedules: constant opportunity costs,Comparative advantage,8,Trading under constant opportunity costs,Comparative advantage,9,Production gains from specialization:,constant opportunity costs,Comparative advantage,Autos,WheatAutos,Wheat,Autos,Wheat,US4040120080-40,Canada,40800160-4080,World801201201604040,BeforeAfterNet Gain,SpecializationSpecialization(Loss),10,Consumption gains from trade:,constant opportunity costs,Comparative advantage,Autos,WheatAutos,Wheat,Autos,Wheat,US404060602020,Canada,4080601002020,World801201201604040,BeforeAfterNet Gain,TradeTrade(Loss),11,Complete specialization under constant opportunity costs,Comparative advantage,12,Changing comparative advantage,Comparative advantage,13,Trade restrictions and gains from trade,Comparative advantage,14,Production possibilities schedule under increasing costs,Increasing opportunity costs,15,Supply schedule under increasing costs,Increasing opportunity costs,16,Trading under increasing costs: US,Increasing opportunity costs,17,Trading under increasing costs: Canada,Increasing opportunity costs,18,Production gains from specialization:,increasing opportunity costs,Autos,WheatAutos,Wheat,Autos,Wheat,US51812147-4,Canada,1761313-47,World2224252633,BeforeAfterNet Gain,SpecializationSpecialization(Loss),Increasing opportunity costs,19,Consumption gains from trade:,increasing opportunity costs,Autos,WheatAutos,Wheat,Autos,Wheat,US51852103,Canada,17620630,World2224252733,BeforeAfterNet Gain,TradeTrade(Loss),Increasing opportunity costs,20,