1. Chapter 6 Alternative Theories of Trade
Some new graphs in this chapter.
Link to syllabus
Chapter 6 Alternative Theories of Trade

2. Figure 6.1 p. 93. Scale Economies
new

3. Declining Cost Industry: High Fixed Cost ($100), Constant Marginal Cost ($2/unit)

4. Figure 6.2 p. 96. Intra Industry Trade in the US, 2009

5. Figure 6.3 p. 97 (new). Average Percentage Shares of Intra-Industry Trade in the Country’s Total Trade in Nonfood Manufactured Products.
Figure 6.3 p. 97. Average Percentage Shares of Intra-Industry Trade in the Country’s Total Trade in Nonfood Manufactured Products.
new
new

6. Figure 6.4 p. 100. US Market for Compact Cars, no Trade (new)
Figure 6.4 p US Market for Compact Cars, no Trade (new graph)

7. Figure 6.5 p. 102. Markets for Compact Cars no trade and free
Opening to trade leads
to more models and
lower costs.
Figure 6.5 p Markets for Compact Cars no trade and free trade (new graph)
(new graph)

8. P. 105. Individual Firm in Monopolistic Competition (new)
With monopolistic competition, the excess
profits are reduced, as are prices and output.
p Monopoly Element in Monopolistic Competition (new)
Opening to trade flattens out the
demand curve, lowering prices
and increasing output.
New graphs

9. Figure 6.6, p. 106. Net Trade and Intra-Industry Trade. (new)
The real world has a combination of Ricardian and Monoplistic 9

10. Figure 6.7 p. 113. External Economies Magnify an Expansion in a Competitive Industry
External economy: expansion of the market lowers costs for everyone. Agglomeration. Scope.
As market expands, move down AC curve, even though individual AC curves slope upwards.
So price will fall with trade (a bigger market). Increased producer surplus in home country, and decreased producer surplus in the importing country. Consumer surplus rises in both countries.
Suggestion that production will be concentrated. “Historical luck or a push from government policy may be important for first countries.” p Similar to infant industry situation.
Opening to trade lowers prices, rather than increasing them.
Different numbered graph from earlier editions

11. Figure 6.8 page 115 Summary of gains and losses from trade in 3 models

12. Sample Calculations
Data on North-South trade.
#9 p. 107 Chapter 6

13. Calculations based on McConnell/Brue page 87
Calculations based on McConnell/Brue page 87. Principal US exports and imports, 2005
Table 5.2 Page 87. Principal U.S. Exports and Imports, 1999.
That computers and automobiles show up on both sides suggests that simple version of comparative advantage is not satisfactory.

14. Q. # 11 p. 119
Question # 9 p. 118