Purchase Solution

International trade and the market system

Not what you're looking for?

Ask Custom Question

1. Why do many economists believe that the market system is the most efficient economic system for allocating resources?
2. What are the four main categories of resources? Explain each of them.
3. (a) Explain what happens in the simple circular flow diagram? (b) What effect do price controls have on the market system?

4. (a) Explain what can we learn from a country's production possibilities curve? (b) How can a nation's production possibilities curve shift inward? (c) Why the production possibilities cure is bowed-out in shape?

5. Will a nation tend to export or import goods for which it has comparative advantage? Explain.

6. Consider a professor who is writing a book. The professor can both write the chapters and gather the data faster than anyone else in the university. Still he pays a student to collect the data at the library. Is this sensible? Explain.

Purchase this Solution
Solution Summary

Explanation of market system. Illustration of comparative advantage. Shifting of a nation's PPF.

Solution Preview

1. Only an unfettered market can efficiently allocate each good and service in a complex economy. It is not possible to centrally plan how much of each good should be produced, but through the pricing mechanism a free market can automatically reajust its allocation of resources to the goods most needed at that time. This occurs because an increase in demand causes prices to rise, which signal sellers to increase production.

2. The four main categories of resources are labor, capital, natural resources, and entrepreneurship. Entrepreneurship is the development of new and better ways of producing goods and the invention of new goods. Capital includes those things ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Environmental Forces and Mode of Entry in International Markets

    Share with the class the ways a U.S. company is affected by a global market, including the international trade system, economies, governments, and cultural factors. Also discuss the different ways a company can enter international markets.

  • Political Integration within Brazil and Chile

    Brazil and Chile do not get discriminated against by the members of the General System of Trade Preferences among Developing Countries. These integrations pose potential risks for the international firms.

  • Foreign Aid

    More payments are going of the country for imports, transfers, or investments than coming in. 3.Describe developing countries and how they differ from industrial market economies. How can international trade aid development?

  • Trade Patterns and Development with Russian Trade

    International trade also results to increased competition which further results to commodities in the market place being priced competitively.

  • Trade Policies: Political factors, CPI report, CSR

    Nigeria's mixed economic system, market led ideologies and policies and good international relations with the United States facilitated the entry of this big giant into the Nigeria market especially after the discovery of oil wells in Nigeria, and the

  • Bonds in Benchmark Market Rates

    These roles are all necessary for international trade.

  • The Fair Trade System

    The process of selling products on the Fair Trade market is complex. The World Fair Trade Organization (formerly International Fair Trade Association), has attempted to created a Sustainable Fair Trade Management System.

  • The Advantages and Limitations of International Trade

    One Learning The extensive application of protective tariffs destroys the ability of the international market system to allocate resources efficiently. The reasons of protective tariffs are: 1.

  • Trends in international political systems

    . // Above, we have discussed about the different political systems and their influence on the international trade, now we will discuss about the trends in the international political systems.// The trend in the international political system is

  • Market Screening

    The Common Market of the South (MERCOSUR) has gradually eliminated almost all non-tariff restriction and other limitations to trade among its members ( Foreign Trade Barriers 2004).

View More Related Solutions