International Trade

Question 1

What are the two sources of economies of scale? How do these economies of scale lead to intraindustry trade?

Your response should be at least 200 words in length.

Question 2

Which of the following are foreign direct investments (FDI), and which are not? Explain your answer to each.

A German businessman buys $10 million of Toshiba stock on the Tokyo Stock Exchange.

A French businessman buys an apartment building in Rome, Italy.

A German company merges with a British company; stockholders in the British company exchange their stock for shares in the German firm.

A Korean firm builds a plant in Brazil and manages the plant as a contractor to the Brazilian government

Your response should be at least 200 words in length.

Question 3

Perfect labor mobility would tend to equalize real wage rates in participating countries. In reality, complete wage equalization does not occur. Why? In addition, if stringent restrictions are imposed on migration, what will happen to capital in high wage countries?

Your response should be at least 200 words in length.

Question 4

Mongolia and Malaysia have very different trading patterns. Mongolia trades mainly with China, while Malaysia trades about equally with China and with other Asian countries. Malaysia does more trade relative to its GDP. Explain these differences using the gravity model.

Your response should be at least 200 words in length.