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iolations of the factor-endowment theory of trade While different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain
iolations of the factor-endowment theory of trade
While different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain all types of trade that economists observe.
Consider each scenario in the following table and determine which theory best explains the trade pattern described.
Scenario | Dynamic Comparative Advantage | Product Life Cycle Theory | Intra-Industry Specialization | |
---|---|---|---|---|
For the past decade, nearly all of the airplanes purchased by airlines in two countries have been made in Wrightitopia. Recently though, scientists in Rullovia developed a new lightweight material that can be used to make the body of planes 20% lighter. The new lighter planes are much more fuel efficient and quickly become the industry standard. In response, the airplane production industry booms in Rullovia, while firms in Wrightitopia lose market share and begin trying to develop a new source of advantage. | ||||
Nekopia and Julerton both produce silver jewelry, but because of their native ancestry, they create different designs on their jewelry. Residents of both countries like to accessorize with a variety of jewelry designs, so both countries are able to export silver jewelry. | ||||
For many years, the nation of Catchester has found it challenging to compete internationally in the market for crab because dangerous work conditions have steered many successful fisherfolk toward safer and more stable careers. In order to attract workers, the Catchester government passed a law providing life insurance policies to all Catchester crab industry workers. This successfully incentivized many former fisherfolk to return to the seas for a career in crab fishing. Catchester is now able to compete more effectively on a global scale and has become a major international exporter of crab. |
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