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External economies of scale and trade

Posted by mjmedlock on July 6, 2011 in international economics |

Effects of external economies of scale on trade The effects of external economies of scale in international trade may not be entirely beneficial to all countries. A country with a large production in an industry will tend to have lower costs in producing a good. This will lead to positive circle, whereby lower costs will […]

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Economies of scale and international trade patterns part 1

Posted by mjmedlock on July 5, 2011 in international economics |

Economies of scale a quick review Economies of scale, definition: When you produce a good or service at lower unit cost for each extra unit you produce, you are achieving economies of scale. Example: Cost to produce 10,000 cars = €70,000                   Cost per car = €7,000 Cost to produce 25,000 cars = €150,000 Cost per […]

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International Economics Barriers to Trade

Posted by mjmedlock on March 29, 2011 in international economics |

Countries put up many barriers to trade in order to protect domestic industries from foreign competition. Tariffs: Tariffs are taxes that are levied on imports. Quotas: Quotas are limits on the number of units/weight (or sometimes the value of goods) imported into a country. The quota might be on the products from all countries of […]

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Comparative advantage David Ricardo’s Trade Theory

Posted by mjmedlock on March 17, 2011 in international economics |

Absolute Advantage To understand comparative advantage we first need to understand absolute advantage. Absolute advantage in the production of a good means that you can produce more of the good with a given amount of a production factor. The factor that we usually use in Ricardian trade theory is labour.   Country Widgets per hour […]

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Comparative Advantage And Trade

Posted by mjmedlock on March 16, 2011 in international economics |

Comparative advantage is a critically important concept to understand when talking about trade, and especially when you want to show doubters the potential benefits of free trade. I’ve found this very good video explaining the principle of comparative advantage. It’s both entertaining and enlightening and saves me the trouble of recording my own explanation! I’ll […]

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