Theory of Comparative Advantage
HOMEWORK 1
4. Theory of comparative advantage:
The theory provides a basis for explaining and justifying international trade in a model world assumed to enjoy free trade, perfect competition, no uncertainty, costless information, and no government interference.
5. Limitations of comparative advantage:
a. Countries do not appear to specialize only on those products that could be most efficiently produced by that country’s particular factors of production.
b. Governments interfere with comparative advantage for a variety of economic and political reasons.
c. Capital and technology; now flow directly and easily between countries rather than only indirectly through traded goods and services.
d. Modern factors of production are more numerous than in this simple model.
e. Terms of trade are determined partly by administered pricing in oligopolistic markets.
6. Trident’s Globalization:
a. International trade phase- exporting products and services to one or more foreign markets; increased demand of financial management. * Direct foreign exchange risk- experience significant risks from the changing values associated with foreign currency payments and receipts. * Credit risk management- evaluation of credit quality of foreign buyers and sellers; reduced possibility of non-payment for exports and non-delivery of imports.
b. Multinational phase- establish foreign sales and service affiliates; establish manufacturing operations abroad or licensing foreign firms. * Foreign direct investment sequence- identify the sources of competitive advantage, expand intellectual capital and physical presence globally.
c. Financial globalization- capital flow freely based on the theory of comparative advantage; growth in the influence and self-enrichment of organizational insiders. * Financial theory * Global business * Management believes and actions
There will be definite and continuing growth in financial globalization which may increase
4. Theory of comparative advantage:
The theory provides a basis for explaining and justifying international trade in a model world assumed to enjoy free trade, perfect competition, no uncertainty, costless information, and no government interference.
5. Limitations of comparative advantage:
a. Countries do not appear to specialize only on those products that could be most efficiently produced by that country’s particular factors of production.
b. Governments interfere with comparative advantage for a variety of economic and political reasons.
c. Capital and technology; now flow directly and easily between countries rather than only indirectly through traded goods and services.
d. Modern factors of production are more numerous than in this simple model.
e. Terms of trade are determined partly by administered pricing in oligopolistic markets.
6. Trident’s Globalization:
a. International trade phase- exporting products and services to one or more foreign markets; increased demand of financial management. * Direct foreign exchange risk- experience significant risks from the changing values associated with foreign currency payments and receipts. * Credit risk management- evaluation of credit quality of foreign buyers and sellers; reduced possibility of non-payment for exports and non-delivery of imports.
b. Multinational phase- establish foreign sales and service affiliates; establish manufacturing operations abroad or licensing foreign firms. * Foreign direct investment sequence- identify the sources of competitive advantage, expand intellectual capital and physical presence globally.
c. Financial globalization- capital flow freely based on the theory of comparative advantage; growth in the influence and self-enrichment of organizational insiders. * Financial theory * Global business * Management believes and actions
There will be definite and continuing growth in financial globalization which may increase