1) Explain how a nation can gain from trade even though not everyone is made better off. Is this a contradiction (explain)?
2) Economic nationalists in developed countries worry that international trade is destroying the national economy. A common complaint is that trade agreements open the economy to increased trade with countries where workers are paid a fraction of what they earn at home. Explain the faulty logic of this argument.
3) Many people believe that the goal of international trade should be to create jobs. Consequently, when they see workers laid off due to a firm’s inability to compete against cheaper and better imports, they assume that trade must be bad for the economy. Is this assumption correct? Why, or why not?
4) Describe the changes in production requirements and the location of production that take place over the three phases of the product cycle.
5) Does intra-firm trade contradict the theory of comparative advantage? Why or why not?
6) General Motors is a U.S.-based multinational, but it is also one of the largest car manufacturers in Europe and South America. How might Dunning’s OLI theory explain the trade-offs GM faced as it decided whether to export to those two markets or to produce in them?
7) Many domestically owned apparel manufacturers buy their garments overseas, sew their labels into them, and then sell them abroad or back into the home market. What are some of the considerations that a clothing manufacturer might go through to choose this strategy instead of producing at home and exporting?