International Trade Assignment
May 5, 2013
It is not wise for countries to run their economies separate from other countries in the
world. It’s important for countries to commit to undertaking trade in order to sell their
surplus products. This is why countries maintain relations with other countries. Because
the world economy is inter-dependent, economic progress of a nation would depend upon
its ties with other countries. The exchange of goods and services between countries is
known as international trade. According to the principle of comparative advantage,
benefits of trade are dependent on the opportunity cost of production. The opportunity cost
of production of goods is the amount of production of one good reduced, to increase
production of another good by one unit. A country with no absolute advantage in any
product (not the most competent producer for any goods) can still benefit from focusing on
export of goods for which it has the least opportunity cost of production. The importance
of specialization is that we live in a world where productive resources are scarce and
human wants cannot be completely satisfied. So individual nations should specialize in the
production of goods it is well equipped to produce. It should export part of this production,
taking in exchange other goods that it cannot so easily turn out.
While completing the international trade simulation, I found that the concept of trading
was more complicated than I originally thought. Trade suggestions that I thought would go
over well did not and many times my offers were rejected. I selected a country with more
