Trade and Specialization Article
Why do countries choose to import some goods and export other goods? One of the reasons for the existence of an international economy is that some goods for some nations have a higher opportunity cost to produce than other goods. For example, it may be very cheap for the United States to produce blue jeans, so it makes sense to sell jeans to other nations, and to import the more costly (for the U.S.) sheep wool from the United Kingdom. In contrast, the United Kingdom may chose to export the wool that it has in excess, and import goods that it finds prohibitively costly to manufacture, in contrast to wool. ("Benefits of Specialization and Trade," Notes on international trade and public policy, 2006) One way to understand the benefits of exporting and importing g
Farmer B=50 head of hog, 10 bushels of corn The opportunity cost of the first scenario would be 60 pigs to Farmer A and 60 bushels of corn for B, while in the second each farmer would sacrifice 10 units of his specialized crop for the cost of producing some amount of his cash or export crop. Farmer A=60 bushels of corn, no pigs The climate and terrain of some nations, and a nation's manufacturing capabilities determine what goods will be cheaper for a nation to produce on a mass scale than other goods. "The country with the lowest opportunity cost of a good has a comparative advantage in producing that good." (Benefits of Specialization and Trade," Notes on international trade and public policy, 2006) When trade takes place between nations, countries will t
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Approximate Word count = 517
Approximate Pages = 2 (250 words per page double spaced)
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