Comparative Advantage and Opportunity Cost
1. Intra-industry trade involves countries exporting and importing the same or very similar goods. Why would countries export and import the same or similar products? Please respond in at least 160 words or more.
2. You are an adviser to a foreign government. Until now, government policy has been to severely limit imports, which has resulted in a low level of exports. The government is now considering a policy to allow freer trade. What are the three strongest reasons that you can offer to the government about why the policy shift will be good for the country? Please respond in at least 160 words or more.
3. Do you agree or disagree with this statement? “Opening up free trade hurts people in import-competing industries in the short-run, but in the long-run, when people and resources can move between industries, everyone gains from free trade.” Explain.