interoffice memorandum
to: | President of Rodamia |
|
subject: | Free trade |
date: | February 17, 2013 |
cc: | Stephanie wells |
| | Free international trade has become a very lucrative option for our country. There are many reasons why our country should open up to trade among our neighboring countries that can have a huge benefit to our nation. Opening up to trade with Suntize, Alfazia, and Uthania would allow our country to put more resources in domestic products and exports that we flourish at making. This could also open doors to more variety of products and benefit consumers’ spending power by making the market more competitive. This can create a strong economy for us as well as our neighbors, creating wealth in the area. Long term it could also help the developing nations, who later on, could bring a new good that can improve the lives of our people.
What the simulation did was show us what free trade could do for our country and also identified what products we have an advantage in producing. This advantage is called the comparative advantage, it details which country has the smallest opportunity cost for producing certain items than others. Those with the smallest opportunity costs should specialize in those products because they have the lowest to lose if they were to make those products. A country cannot have a comparative advantage in all products because it reflects the relative opportunity costs of creating one product over the other. (Mankiw, PG. 53) The simulation did not cover the comparative advantages, but it did not describe the absolute advantage; or the amount of resources each country has to use in order to create the goods. The reason why absolute advantage was not included into this simulation was because trade depends more on comparative advantage. This is because trade is about creating more production in the economy as a whole. (Mankiw, Pg. 52-54)
Opening up to free trade can allow our dairy industry to create…