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9 Cards in this Set
- Front
- Back
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Mercantilism
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-An economic philosophy advocating that countries should encourage exports and discourage imports
-This acquires as much wealth as possible -Subsidize exports and limit imports by Tariffs and Quotas. |
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Protectionism
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Shielding a country's domestic industries from foreign competition by taxing imports
-Tariff -Quota etc. |
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Absolute Advantage
Adam Smith |
-When a country is more efficient than any other at producing a product
-A country should never produce goods that they can buy at a lower cost from other countries |
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Comparative Advantage
David Ricardo |
-Countries should specialize in the production of goods they can produce relatively more efficiently
-And purchase what they produce less efficiently from other countries. Even if this means buying goods they can produce more efficiently themselves |
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Hecksher-Ohlin Theory
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-Hecksher Ohlin argue that a countries nature FACTOR ENDOWMENTS underlie their competitive advantage (land, capital, labour)
-Countries export goods that exploit these, and import goods from which they are scarce. |
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The Product Life Cycle Theory
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As a product matures and demand grows in foreign markets the product becomes standardized (manufacturing) and the price becomes competitive.
The original manufacturing country loses the advantage and optimal location for production changes. |
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New Trade Theory
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Success depends on a combination of:
-economies of scale -first mover advantages (ability to dominate the market) |
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Economies of Scale
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Cost advantages associated with large scale production
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National Competitive Advantage
Porters Diamond |
Firms are most likely to succeed when the diamond is most favorable.
-Factor conditions -Demand conditions -Related and supporting industries -strategy, structure and rivalry Chance events and Governments are two additional variables that are likely to influence the diamond |
