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Trade Agreements

A trade agreement or trade pact is when regions or countries agree upon a system or solution that benefits the countries involved in terms of international trade.

Free trade is when there are no restrictions on imports and exports for the exchange of goods and services between countries. The government does not intervene in the exchanges and does not place tariffs or subsidies on imports or exports. Free trade is based on the economic theory of comparative advantage, which is the ability of a party to produce goods or services at a lower marginal cost than another party. Free trade will allow each country to specialize in their own comparatively advantageous goods and trade for other goods. In this way, efficiencies are taken advantage of and each country profits by being able to consume outside of their own autonomous production possibilities. 

Trade barriers can be part of a trade agreement where governments set up economic policy of protectionism, which is when international trade is limited. Governments may engage in such policies to shield the domestic economy from the negative consequences of international trade; certain domestic industries may be unable to compete with more developed international firms. Types of protectionism include tariffs, banning the import of a specific good, restricting the number of goods imported, and requiring foreign governments to make a payment for the right to import goods.

There are pros and cons to each side of international exchange and the effects of free trade and trade barriers are important to understanding how trade agreements work and how the international economy functions.

Global Climate Change Emissions

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Free Trade and its benefits and costs

Are you for or against free trade? Are you for or against NAFTA? What is the economic basis for trade? Explain the underlying facts that support free trade and give an example of a good that you purchased recently that is based on resource differences. What are some examples of goods that the U.S. has comparative advantage in pr

Member EU States that have adopted the Euro

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Discussion on the Wage Difference Between Mexico and the United States

Ross Perot added his memorable "insight" to the debate over the North American Free Trade Agreement (NAFTA) when he warned that passage of NAFTA would create a "giant sucking sound" as U. S. employers shipped jobs to Mexico, where wages are lower than wages in the United States. As it turned out, many U. S. firms chose not to pr

The Success of NAFTA

What do you know about NAFTA? Use the internet to gather some information about NAFTA and why and when it was started? Do you believe it has been successful in achieving its objectives? Why or why not? Make sure to state the sources from where you got your information.

Exporting vs. Importing

Need help answering homework question, please. If a nation exported much of its output but imported little, would it be better or worse off? How about the reverse of exporting little but importing lot?

Entering or Exiting a Market

What is the role of timing in deciding to enter or exit a market? Firms decide to enter a market based on current and historical information, but time lags can change the economic environment. What are the risks a firm faces in deciding to enter or exit a market?

Five force analysis

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Politicians as Economists

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tariffs, quotas, etc

Since the case for gains from trade for a country is strong, why do governments continue to attempt to reduce trade with tariffs, quotas, and the like?

The HHI Index

Suppose Fiat recently entered into an Agreement and Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel-drive tractors consisted of five firms. The market was highly concentrated, with Herfindahl-Hirschman index of 3,025. Case's share of that market was 27 percent, while Fiat comprised ju

Article summaries from The Economist Magazine

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Debate over CEO Compensation is presented.

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Call & put options (finance)

Please help with the following problem about international trade. Provide step by step calculations in the solution. You observe that a non-dividend paying stock, with a current price of $50, has 1-year American calls and puts written on it, both with exercise prices of $50. The 1-year interest rate is 10%. (a). If the ca

NPV determination

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Trade Credit

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Budgetary control and responsibility

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Inventory Cost Problem and a Cash Balance Problem

I need help with these two homework problems...could you provide a step by step solution so that I may understand the concepts? P7-1 (Determine Proper Cash Balance) Dumaine Equipment Co. closes its books regularly on December 31, but at the end of 2007 it held its cash book open so that a more favorable balance sheet could

Incremental analysis

Mesa Industrial Products Co. (MIPC) is a diversified industrial-cleaner processing company. The company's Verde plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week 900,000 ounces of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor c

Calculated EPS

Problem Given Best Travel organizes virtual travel tours, is planning an IPO. Its current investors hold 300,000 shares, which at IPO will be converted into common shares at 1:1 ratio. The company competes with the following publicly traded companies: CoachTraveler, VirtualExplor


Consider two securities that pay risk-free cash flows over the next two years and that have the current market prices shown here: Security Price Today ($) Cash Flow Cash Flow in One Year ($) in Two Years ($) _________________________________________________________


In 1996, Kodak paid a cash dividend of $1.60 per share. At year-end 1996, Kodak shares were trading at about $80 per share. Between 1997 and 2001, Kodak paid $1.76, and in 2002 raised its dividend to $1.80. Yet, despite the stable dividend payout, the price of Kodak stock steadily fell, reaching $27 in 2003. At that time, th

Equity Capital

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