Considering the various economic theories discussed in Chapter 3, which one do you think is most useful to managers in trying to understand how international trade actually works? Why?
The most useful theory for managers trying to understand how international trade works is the comparative advantage theory. The theory of comparative advantage, initially introduced by David Richardo, denotes that nations should concentrate on generating and exporting goods in which it has comparative, privilege or relative costs to other nations and concurrently import products has a comparative disadvantage (Steers & Nardon, 2005). This theory identifies that a country can have the comparative advantage in producing a certain product or service at a reduced opportunity cost compared to their counterparts. The opportunity cost, in this case, implies the expense incurred after not choosing one option to take up the best.
For example, the comparative advantage comes up when a country is not capable of producing………………………
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Do you think US and other OECD member companies should be required to abide by laws and conventions against bribery while some of their principal competitors who are not from OECD member countries do not?
The USA and other OECD member companies should be required to abide by laws and conventions against bribery even when some of the principle competitors who are not members of the OECD countries do not. Bribery results in unfairness while trading (Steers & Nardon, 2005). Consequently, unfairness will lead to conflicts between countries. For example, when a company that is not among the members of the OECD bribes to import or exports different products, clashes will have to arise. The conflict will result because bribery results in the export or import of substandard or illegal products. The country that will identify the substandard or illegal products in their market will launch initiatives to determine how the product came into the nation. As a result, the country will get into conflicts with nations where the products came from.
Additionally, it is vital to abide by the laws and conventions against bribery because the vice leads to individuals not reaping what they sow in entirety……………………………………….
What are the advantages and disadvantages of belonging to a free trade area, such as NAFTA, compared to an economic union such as the European Union?
There are numerous advantages of Free Trade Area (FTA) compared to the economic unions. Firstly, a member country that views the association not beneficial can easily leave the FTA. Conversely, the process of leaving an economic union is stringent and complicated and usually takes a long time. The process of leaving is intricate because of the multiple laws and regulations erected during formation of the union meant to guard the association at all cost (Steers & Nardon, 2005). Secondly, FTA could increase trade between countries compared to economic unions. FTA focuses on identifying factors that favor trade between the member countries. In this way, policies are developed in a manner that promotes trade. On the contrast, economic union opens national boundaries totally which results in one country disadvantaging…………………………………….
References
Steers, R. M., & Nardon, L. (2005). Managing in the global economy. Armonk, N.Y: Taylor and Francis.
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