University Economics: International Economics Assignment Analysis

This assignment provides a comprehensive analysis of key concepts in international economics. It begins by defining globalization, exploring its driving forces, and examining its waves and impacts on economies, including both benefits and potential harms to firms and workers. The assignment then delves into international competitiveness, its measurement, and its relationship with globalization. Further, it explains the terms of trade, its determinants, and its implications for a country's economic health. The principle of comparative advantage is also discussed, distinguishing between static and dynamic gains from trade, and analyzing how opportunity costs influence production decisions. The assignment includes a production possibilities frontier analysis for Canada and France, illustrating specialization in aluminum production. Additionally, it examines trade models such as the Ricardian and Heckscher-Ohlin models, and explores the effects of trade and immigration on income inequality, wages, and education. Finally, the assignment covers economies of scale, differentiating between internal and external economies, and providing examples of how these factors influence international trade. References from various economics texts are provided.

Economics
Name of the student
Name of the university
Author note

Chapter 1
Answer 1
Globalization is the process of integration and interaction among the people, governments
and companies worldwide.
The forces that drives the globalization are advancement of technologies, high rate
competition, rise in consumer demand and reduction in the cross trade barriers
There are basically three waves of globalization. The first wave took place from 1860 to 1914
which took place in Europe and North America had been strongly affected by the
internationalization(Cowen and Tabarrok 2015). The important drivers were the new
technology which will bridge the long geographical distances like steam engine, electricity
and internal combustion engine. The second wave took place between 1944 to 1971. The
third wave however took place in 1989. More countries have adopted free trade and there was
introduction internet, mobile phones, PC and microprocessor during the third wave.
Answer 2
Globalization usually encourages the consumers and producers to benefit from the economies
of scale, it reduces the issues of labour exploitations, helps the developing countries to grow
faster and also encourages free trade.
However, in some cases globalization have led to exploitation of labours. It have been also
found out that globalization benefits the wealthy people more than the poor, it can also reduce
social safety net programs. Globalization can also led to transfer of disease (Kreps 2019). It
have negative effect on the developing and poor countries. The strong countries are known to
exploit the underdeveloped countries. Due to globalization, competition have increased a lot
due to entry of new firms and can also lead to economic disaster.

Answer 3
International competitiveness is defined as the process where high level of competitiveness
are achieved at various levels which can be either in national level or regional levels.
Innovation is the key element for improving the competiveness and opportunities of the
industry. international competitveness is a measure of the relative cost of services and goods
from a country. Countries are known to produce the similar quality of goods at a much lower
cost are said to be more competitive in nature (Tahir, Ghazali and Agil 2017). Therefore, it
can be said that higher labour productivity is the key for increasing the competitiveness in the
industry and the living standards at the same time. Globalization is a leading concept which is
termed as the main factor in the business life during the last few decades and this competition
can be related to products.
Answer 4
The terms of trade is the relative price of imports in terms of exports and is known to be
defined as the ratio of export prices to import prices (Khalil., Lawarre. and Scott 2018). The
terms of trade acts as an indicator of the economic health of a country. Changes in the prices
of imports and imports will impact the terms of trade. The terms of trade refers to the rate at
which one country exchanges its goods for the goods of other countries. Therefore, trade
determine the international value of the commodities.
The factors which affect the terms of trade are changes in technology, changes in factor
endowments and due to change in economic growth. Tariff can also affect the terms of trade
as it reduces the profit in the economy. The reciprocal demand also acts as a factor affecting
the terms of trade in the economy.
Answer 5

Comparative advantage states the ability of the economy for production of goods and services
at a much lower opportunity cost than the other trade partners. The principle of the
comparative advantage holds that under free trade, an agent will be producing more and
consume less goods for which they have comparative advantage.
The gains from trade can be clad into dynamic and static gains from trades. The static gains
means that the rise in social welfare takes place due to increased national output due to
optimum utilization of factor endowments of the country (Cowen and Tabarrok 2015). On the
other hand, dynamic gains from trade relates to the economic development of the economy.
The static gains are the result of operation of the theory of the comparitive cost in the field of
the foreign trade. In case of increasing opportunity cost, the country will be producing
realtively larger amount of good in which it will be having the comparative advantage.
Answer 6
Answer a
Steel (Tons) Aluminum (Tons)
0
200
400
600
800
1000
1200
1400
Chart Title
Canada France
Answer b

From the above table it can be said that both France and Can should be specializing in the
production of aluminium since both the countries specializes in the production of aluminium.
The producer which requires a smaller quantity inputs to produce a good is said to have an
absolute advantage in the production of goods. Comparitives advanatges refers to the ability
of a party to produce a particular good or service at a lower opportunity cost than another
Chapter 3
Answer 7
Countries trade with each other when they lack the resources or capacity for satisfying their
own wants and needs. By exploiting the domestic scarce resources countries will able to
produce surplus and will trade this for the resources they want.
The Ricardian model suggests that the countries usually specialize in the production of
goods and services in which they can do best. The Hecksher Ohlin model states that countries
should produce and export those goods which they have in abundance. Ricardian model
assumes that there is only one factor of production, labour while Heckscher Ohlin states that
there are two factors of production that is labour and capital. Hecksher Ohlin is in most cases
preferred to Ricardian theory (Tahir, Ghazali and Agil, 2017). It also assumes that in case of
the long run all the countries will be having similar technology. It also assumes that that both
labour capital and flow freely in the long run.
Workers from the commpetitive firms are known to gain from trade. Workers who gain jobs
in the export industries are known to gain from trade. The Hecksher Ohlin model states that

the workers who are available in the relatively labour abundant country will be more efficient
in nature.
Answer 8
It have been found out that trade reinforces income inequality. Free trade is always good for
the world however it can prevent necessary adjustments in many countries. Trade can
improve the living standards since it lowers the cost of goods and services. Therefore, there is
a strong correlation between trade and income inequality for producing various output.
Immigration is known to increase the labour supply in the economy which also means that
more goods and services are being produced in the economy. More labour also means that
more services and goods are produced in the economy. An increase in the number of
immigrants can also decrease the wages of domestic unskilled workers. Immigration can also
help in expanding the opportunities for college education. More education means higher
earnings, this also means that more money can be circulated through local stores and
business. Therefore, immigration is known to have both advanatages as well as disadvanatges
in the economy. The primary impact of the inflow of immigrants is an expansion in the size
of the economy like the increase the labour force. The employment and wages prospects will
be unaffected in nature. There is a presence of strong relationship between education and
migration in the economy. However, migration will aso have a indirect impact on education.
Answer 9

The economies of trade gives rise to international trade. The economies of scale re the cost
advantage which the enterprise obtain as a result of their scale of operation. International
trade takes place due to the existence of the economies of scale since in this case more output
is produced at lower cost. The economies of scale is also known to reduce the average
production of cost. There are various types of economies of scale which depends on the
particular characteristcs of an industry. it can be said that the internal economies of scale
takes place from the growth of the business.
The internal economy of scale is known to measure the efficiency of company’s production.
On the other hand, external economies of scale occur outside the firms but within the
industry. These advantages takes place when the number of firms in the industry will rise.
There are different kinds of economies of scale in the world.
External economies of scale are the business enhancing factors which occur outside the
company. Like for example, the film studio fids that California is a good location for making
films and they move to Hollywood. Then new producers move to Hollywood and more
studios also decide to move to Hollywood to take the advantage of the specialization of
labour (Nechyba 2016). As more and more firms succeeded in the similar area, the new
industry entrants will take advantage of the localized benefits.
Answer 4
The terms of trade is the relative price of imports in terms of exports and is known to be
defined as the ratio of export prices to import prices. The terms of trade acts as an indicator
of the economic health of a country. Changes in the prices of imports and imports will impact
the terms of trade (Friedman 2017). The terms of trade refers to the rate at which one country

exchanges its goods for the goods of other countries. Therefore, trade determine the
international value of the commodities.
The factors which affect the terms of trade are changes in technology, changes in factor
endowments and due to change in economic growth. Tariff can also affect the terms of trade
as it reduces the profit in the economy. The reciprocal demand also acts as a factor affecting
the terms of trade in the economy.
Answer 5
Comparative advantage states the ability of the economy for production of goods and services
at a much lower opportunity cost than the other trade partners. The principle of the
comparative advantage holds that under free trade, an agent will be producing more and
consume less goods for which they have comparative advantage.
The gains from trade can be clad into dynamic and static gains from trades. The static gains
means that the rise in social welfare takes place due to increased national output due to
optimum utilization of factor endowments of the country (Cowen and Tabarrok 2015). On the
other hand, dynamic gains from trade relates to the economic development of the economy.
The static gains are the result of operation of the theory of the comparitive cost in the field of
the foreign trade. In case of increasing opportunity cost, the country will be producing
realtively larger amount of good in which it will be having the comparative advantage.
Answer 6
Answer a

Steel (Tons) Aluminum (Tons)
0
200
400
600
800
1000
1200
1400
Chart Title
Canada France
Answer b
From the above table it can be said that both France and Can should be specializing in the
production of aluminium since both the countries specializes in the production of aluminium.
The producer which requires a smaller quantity inputs to produce a good is said to have an
absolute advantage in the production of goods. Comparitive advanatges refers to the ability of
a party to produce a particular good or service at a lower opportunity cost than another.

Reference list
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Kreps, D.M., 2019. Microeconomics for managers. Princeton University Press.
Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private partnerships.
Journal of Public Economic Theory, 17(1), pp.4-48.
Bade, R. and Parkin, M., 2015. Foundations of microeconomics. Pearson.
Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University
Press.
Khalil, F., Lawarree, J. and Scott, T.J., 2018. Applied Microeconomics.
Cowen, T. and Tabarrok, A., 2015. Modern principles of microeconomics. Macmillan
International Higher Education.
Postlewaite, A., 2016. Report of the Editor: American Economic Journal: Microeconomics.
American Economic Review, 106(5), pp.736-39.
Nechyba, T., 2016. Microeconomics: an intuitive approach with calculus. Nelson Education.
Tahir, S., Ghazali, A. and Agil, S.O.S. eds., 2017. Readings in Microeconomics: An Islamic
Perspective. In The Name of Allah, The most Beneficent, The most Merciful, p.104.
Martimort, D., Menezes, F., Wooders, M., Iossa, E. and MARTIMORT, D., 2015. The
Simple Microeconomics of Public-Private Partnerships. Journal of Public Economic Theory,
17(1), pp.4-48.