comparative advantage

Question 1

the realities of CA assumptions

Answer 1

1. 2 countries produce 2 goods → countries trade w many countries, and produce multiple goods
2. uses half its resources for each good → not true, depend on demand
3. assume full mobility intra-nationally → not perfectly mobile occupationally or geographically
4. assume full mobility internationally → easier due to tech improvements, but not full mobility ++ increased mobility w/in countries will DECREASE trade
5. constant opp cost → opp cost likely to increase over time bc all resources are not equally suitable and efficient
6. no barriers to trade → protectionism
7. no transport costs → there is costs, may exceed CA

Question 2

reasons CA may improve?

Answer 2

1. discovery of new resources that change factor endowments
2. new tech/ more efficient methods of prod via new raw materials
3. specialise in industries where EOS can be gained
4. govt polices to improve qlty of resources

Question 3

reasons CA may be lost?

Answer 3

1. productivity growths falls behind foreign competition → increased opportunity cost
2. depletion of natural resources
3. increased opportunity costs
4. chaning govt policies

Question 4

CA table

**very impt!!!!!!!!

Answer 4

order: output: before specialisation → after spec, before trade → aft spec, aft trade [cars, rice]
Japan: 100, 50 → 110, 45 → 103, 52
thailand: 5, 10 → 0, 20 → 7, 13
world: 105, 60 → 110, 65 → 110, 65

^^table form!!!