Applying International Trade Concepts Paper

Applying International Trade Concepts Paper
ECO/372: Macroeconomics
April 4, 2010

Applying International Trade Concepts Paper
In the University of Phoenix simulation, Applying International Trade Concepts, a situation is presented concerning international trade - “the theory of comparative advantage, the impact of tariffs, quotas, and dumping, and the rationale behind free trade agreements (FTA)” (University of Phoenix, 2010, p. 19). Throughout the simulation scenarios are presented and choices must be made to determine “what products to produce within the country and what products to import based on the Production Possibility Frontier (PPF) (University of Phoenix, 2003, para. 1) as well as when to impose trade restrictions like tariffs and quotas, and when to negotiate trade agreements.
Advantages and Limitations
One of the advantages of international trade is imported products that are produced more efficiently in other countries will give consumers more choice in terms of price and quality. Another advantage is increased demand leads to an increase in production, achievement of economies of scale, and therefore, more competitive production. As domestic producers expand their markets to other countries, the initial country gets new avenues for investment, which leads to more employment in the country where investment is taking place, and better returns on capital for the investing county.
International trade has limitations as well. Trade barriers for countries that do not participate in free trade agreements are high relative to the countries that participate in free trade agreements, even though the non-participating country may be more competitive in the production of a product.
Effects of International Trade
The effects of international trade in the United States are varied. The amount of goods that are available to the United States has increased, while the price of goods has decreased. U.S. consumers have more choices...