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Essay / Research Paper Abstract
This 5 page paper answers three questions posed by the student. 1. What is comparative advantage, how, and why, the concept has been modified over time. 2. The role of the US executive, and 3. a definition of the terms ”national treatment” and “most-favored nation”. The bibliography cites 4 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEinttrd1.rtf
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Unformatted sample text from the term paper:
takes place. If we look to the theorist Adam Smith we see that he stipulates that each nations should concentrate on producing goods where they have the absolute advantage (Thompson,
1998). This means that they should produces the goods that they can produce in a more effective manner than any other nation. For example, if one country can produce 100
tones of coal for the same cost as 200 tones of potatoes, and one can produce 100 of potatoes for the same cost to resources as 200 tones of coal,
each country should produce the commodity that has the lowest cost and then trade for what it needs. In this way resources or maximized through the comparative advantages. However, this
model is very simple, and in reality there are many nations trading many goods, and the development of trade has not followed this model. In many cases a country will
still produce some of a commodity that another national can produce more cheaply. David Ricardo developed an alternative idea and although this
sounds similar it is a very different approach. Ricardo states that countries should make their decision of what commodities to produce and export by reference to that which has the
smallest absolute disadvantage and import that commodity where the absolute disadvantage is the greatest (Anonymous, 2000). This is also known as the theory of comparative advantage (Anonymous, 2000).
In this we can see if between the two nations they both have an absolute disadvantage that there is still a beneficial reason for one
of the two trading countries to produce the goods (Anonymous, 2000). This international trade in reality does not occur between only two countries, but if we apply the model
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