For each of the following scenarios, determine which benefit of international tr

Question

For each of the following scenarios, determine which benefit of international trade applies: lower-priced goods, increased variety of products, or access to scarce resources.

a. Today most television sets bought in the United Stated are made in China; however, this was not the case twenty years ago.



b. In large grocery stores in the United States, consumers can buy noodles from Asia, soups from France, pickled herring from Scandinavia, and beer from Germany.



c. The United States has become a prime location for producers of semiconductors, whose products are then exported to nations around the world. This choice to produce in the United States is largely due to the access to the high-skilled workforce that is required for this type of production.



d. While many developed nations have at least one domestic car manufacturer, consumers in these nations also have access to cars produced in other nations.



e. The United States has long been the world's largest exporter of wheat. The access to vast, fertile, and highly productive soil combined with high-technology farming practices have made the United States a very cost-efficient producer of agricultural goods.

Explanation / Answer

(a)

United States is importing more television sets from China then it was twenty years ago. This is due to the fact that during intervening period China has developed competency to build television sets at low cost and thus United States is able to procure television sets at much lower cost from China than to be able to produce domestically. Thus, customers in United States get benefit of low prices.

Hence, the given statement demonstrates the lower price goods benefit of international trade.

(b)

This availability of goods from different parts of World in the large grocery stores of United States is a byproduct of international trade. This has increased the variety of goods available to consumers in United States.

Hence, the given statement points towards the increased variety of products benefit of international trade.

(c)

United States posses the workforce needed for production of semi-conductors. In other words, United States has the scarce resources (highly-skilled workforce) that are needed for production of semi-conductors and due to this producers produce semi-conductors in United States and export them around the world. This production is happening in United States as a result of international trade taking advantage of scarce resources of United States.

Hence, the given statement points towards the access to scarce resources benefit of international trade.

(d)

The consumers in developed nation having access to cars produced in other nations points towards the fact that international trade has enabled the developed nations to import cars from other nations as well. This has increased the variety of cars for the consumers of developed nations. In other words, consumers can choose from various foreign options as well and not only have to rely on domestic option only.

Hence, the given statement points towards the increased variety of products benefit of international trade.

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