Chapter 6 Alternative Theories of Trade
Some new graphs in this chapter.
Link to syllabus
Figure 6.1 p. 93. Scale Economies
Declining Cost Industry:
Fixed Cost
Total Cost
High Fixed Cost ($100), Constant
100 Marginal CostAverage Cost
Marginal Cost ($2/unit)
1
2
102 102.0
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
104
106
108
110
112
114
116
118
120
122
124
126
128
130
132
134
136
138
140
142
144
146
148
150
152
154
52.0
35.3
27.0
22.0
18.7
16.3
14.5
13.1
12.0
11.1
10.3
9.7
9.1
8.7
8.3
7.9
7.6
7.3
7.0
6.8
6.5
6.3
6.2
6.0
5.8
5.7
120
100
80
Cost
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Marginal Cost
60
Average Cost
40
20
0
0
10
20
Level of Production
30
Figure 6.2 p. 96. Intra Industry Trade in the US, 2009
Figure 6.3 p. 97 (new). Average Percentage Shares of Intra-Industry
Trade in the Country’s Total Trade in Nonfood Manufactured
Products.
Figure 6.4 p. 100. US Market for Compact Cars, no Trade (new)
Figure 6.5 p. 102. Markets for Compact Cars no trade and free
Opening to trade leads
to more models and
lower costs.
(new graph)
P. 105. Individual Firm in Monopolistic Competition (new)
With monopolistic competition, the excess
profits are reduced, as are prices and output.
Opening to trade flattens out the
demand curve, lowering prices
and increasing output.
New graphs
Figure 6.6, p. 106. Net Trade and Intra-Industry Trade. (new)
The real world has a combination of Ricardian and Monoplistic
Figure 6.7 p. 113. External Economies Magnify an
Expansion in a Competitive Industry
Opening to trade lowers prices, rather than increasing them.
Different numbered graph from earlier editions
Figure 6.8 page 115
Summary of gains and losses from trade in 3 models
Sample Calculations
Data on North-South trade.
Exports
Food, beverages, tobacco
70
Petroleum
30
Chemicals
121
Machinery & Transport equipment
501
Clothing
45
Imports
80
226
40
412
140
| X- M |
10
196
81
89
95
(X+M)
1-|X-M|/(X+M)
150
256
161
913
185
0.93
0.23
0.50
0.90
0.49
IIT
#9 p. 107 Chapter 6
0.72
Calculations based on McConnell/Brue page 87. Principal US exports and imports, 2005
Exports
Using data from intro text
Chemicals
68.6
Consumer Durables
53.5
Ag products
52.9
Semiconductors
47.2
Computers
45.5
Generating Equipment
33.2
Automobiles
30.4
Aircraft
29.1
Medical
27.6
Telecommunications
25.6
Imports
Semiconductors
37.1
Computers
93.3
Generating Equipment 43.1
Automobiles
123.7
Telecommunications
25.8
Petroleum
251.6
Household Appliances 97.1
Metals
83.8
Clothing
79.1
Consumer Electronics 47.3
| X - M | (X+M)
69
54
53
10
48
10
93
29
28
0
252
97
84
79
47
1-|X-M|/(X+M)
69
54
53
84
139
76
154
29
28
51
252
97
84
79
47
0.00
0.00
0.00
0.88
0.66
0.87
0.39
0.00
0.00
1.00
0.00
0.00
0.00
0.00
0.00
IIT
0.27
Q. # 11 p. 119