Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

why these two are right? #1 Intra-industry trade means international trade of goods within the same industry. Comparative advantage in a good is when a

why these two are right?

#1

Intra-industry trade means international trade of goods within the same industry.

Comparative advantage in a good is when a country can produce that good at a lower opportunity cost than another country.

Intra-industry trade appears surprising from the point of view of comparative advantage because comparative advantage suggests that trade should happen between economies with large differences in opportunity costs of production. However, 50% of all world trade involves shipping goods between the fairly similar high-income economies of the United States, Canada, the European Union, Japan, Mexico, and China.

Comparative advantage also suggests that each economy should specialize to a degree in certain goods, and then exchange those goods. A high proportion of trade, however, is intra-industry trade, meaning trade of goods within the same industry from one country to another

#2

Trade barriers are limitations or restriction on international trade which have been imposed by Government authorities. This can include Tariffs, Import / Export licenses, Import quotas etc. Governments create trade barriers for any of the following reasons:

Protecting Domestic Employment

If the goods or services being produced outside the country are available at a cheaper or more economical cost then consumers will prefer to purchase foreign goods and companies would shift production abroad and fire local workers to cut costs.

Protecting Infant Industries The government will levy tariffs on imported goods in industries where it wants to foster the growth of local industries. This increases the cost of imported goods and protects them from being forced out by more competitive pricing.

National Security Certain industries that are important for defense or support national security will have tariffs and other controls applied to foreign companies to protect them. This ensures that the country's defense and security apparatus is not controlled by companies from outside the country.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Economics

Authors: Thomas Pugel

16th Edition

0078021774, 9780078021770

More Books

Students also viewed these Economics questions

Question

5. How is the service delivered?

Answered: 1 week ago