2. Nicaragua: Apparel Factory

4. International Trade

5. WHY TRADE? Benefits of Engaging in International Trade

6. Benefit #1: Comparative Advantage Countries specialize in the goods that it produces at the lowest opportunity cost. Specialization = greater world output

7. How does a country know what to produce? 1.Labor and capital – Educated labor force – High tech capital 2.Soil and seasons – Climate – Elevation – Farmland – Seasons 3.Mineral Deposits – Oil – Coal – Diamonds

8. U.S. Imports vs. Exports

9. Benefit #2: Economies of Scale Specialization allows firms to produce enough to enjoy “economies of scale” Economies of Scale: As firms become larger, the average cost of output declines. Selling price falls

10. Why is organic food so much more expensive? Locally grown food?

12. Benefit #3: Differences in Tastes As preferences differ across countries, trade allows nations to import/export according to their tastes. -Ex. Algerian Wine Also, trade helps countries avoid seasonal fluctuations

14. Top Oil Exporting Countries