The process of changing comparative advantage in China is the same as it was in the United States.
China is moving out of low- skilled labor-intensive industries and into higher skilled ones as wages rise in comparison to other less developed countries.
Chinese competition up the value chain provides more competition for U.S. college students going into the job market.
The world economy has become more integrated, the pro pie, and Barbie and Ken's origins give us some insight into the modern U.S. economy and its relationship with other.
Barbie and Ken are not produced in the United States in order to find the cheapest place to make them.
Barbie came out in 1959
There is global diversity in manufacturing and supply of Barbie and Ken.
The box they of components are in is only a small part of the story of modern produc.
Barbie and Ken are important to the manufactur that is actually made in five different countries, and it is this other half that explains each focusing on an aspect of production how the United States maintains its posi.
China pro manufacturing can be found elsewhere.
Much of what is normally considered does so by maintaining its control over manufacturing, factory spaces, labor, and the distribution and marketing of the energy for assembly, but it imports a lot.
The oil for the plastic comes from Saudi Barbie or Ken, $12 can be accounted for by activities other than Arabia.
Taiwan processes that oil into plastic pellets.
The United States provides some of the raw materials that are used in merchandising and advertising.
The manufacturing process provides the card United States and many of these activities are still done in board, packing, paint pigments, and the mold.
Many goods today are a result of the different parts that go into the manufactur high living standard.
There is more to be said about both trade and the gains from trade, and later chapters will explore trade in more detail.
The economies of the world are highly integrated in a globalized world.
There are two effects on firms from globalization.
Because the world economy is larger than the domestic economy, the rewards for winning globally are larger than for winning domestically.
It is much harder to win or stay in business in a global market.
The global economy increases the ducer in a particular country yet may face foreign competitors that can undersell it.
There are more competitors for the firm because of the global economy.
Consider the industry of automobiles.
The question is if it's fair that U.S. workers don't work in high-tech and creativity fields in China and India.
The market doesn't directly take fairness into account, they are trying to entice top scientists and engineers.
The market only cares about who can produce to stay in their country or return home if they have a good or service at the lowest cost.
This means that you have been studying or working in the United States.
The United States can maintain more than 50 percent of PhDs given in science if it has a competitive economy.
The United States can't assume that it will keep the same amount of imports for exports as it did in the past.
The United States has had a comparative advantage in the past when it comes to trade, but eventually forces will be set in motion that will allow developing countries to recognize that.
U.S. automakers will not survive unless they meet foreign competition.
The two effects are related.
If you survive in a larger market, the rewards are greater.
Globalization is simply another name for increased specialization.
Companies can move operations to countries with comparative advan tage because of globalization.
They lower the costs of production.
Globalization leads to companies specializing in smaller portions of the production process because the potential market is not just one country but the world.
In a global economy, production will shift to the lowest cost producer.
Economists agree that it will.
The United States has a comparative advantage in terms of labor costs, which makes it hard for people to think of goods with that advantage.
The United States has advantages in technology, institutional structure, specialized types of knowledge, and entrepreneurial know-how.
The U.S. has advantages that result in higher wages.
Goods that require creativity and innovation have been excelled by the United States.
The United States has remained the leader of the world economy and has kept a comparative advantage in many goods even with its high relative wages because of continual innovation.
The United States is the location of so many technology firms because the Internet started there.
The United States has been at the forefront of innovation.
The United States will be able to specialize in goods that allow firms to pay higher wages if the U.S. production maintains a comparative advantage in innovation.
There is reason to be concerned.
If innovation and creativity don't develop new industries in which the United States has a comparative advantage fast enough, as the current dynamic industries mature and move to low-wage countries, the United States will not.
Demand for goods and services from the U.S. will be higher than foreign demand.
It has been the case for the last 20 years.
To bring them into equilibrium, the U.S. wage premium will have to decline.
Since nominal wages in the United States are not likely to fall, large increases in foreign wages will most likely occur.
Either of these will make foreign products more expensive in the U.S. and cheaper in foreign countries.
The Law of One Price is the best policy the United States can hope for, even though many Americans don't like it.
If the United States tries to prevent outsourcing with trade restrictions.
The United States will be in worse shape than if it had allowed outsourcing because U.S.-based companies will no longer be able to compete internationally.
Competition and technology drive wages and prices of similar factors and goods toward equality.
In a later chapter, we will discuss what an equal worker is and what an equivalent institutional country is.
Since World War I, the United States has been able to avoid the law of one price in wages.
The United States consumes more goods than it produces because foreigners want to increase their holdings of U.S. financial assets.
The United States' institutional structure, technology, entrepreneurial labor force, and nonlabor inputs give it a strong comparative advan tages to offset the higher U.S. wage rates.
The United States' comparative advantages have been eroded by the passage of time and modern techno logical changes.
To maintain a balance in the comparative advantages of various countries, the wages of workers in other countries such as India and China will have to move closer to the wages of U.S. workers.
For the past 20 years, manufacturing wages in the United States have been flat while Chinese wages have increased by double digits each year.
The gap between Chinese and U.S. manufacturing wages has been reduced.
Vietnam and Bangladesh have low-cost manufacturing competition.
There is one final comment about globalization and the U.S. economy.
There is a proposition that trade makes both countries better off.
The discussion does not support the position taken by some opponents to trade and globalization that foreign competition is hurting the United States and that the United States can be made bet er off by imposing trade restrictions.
The benefits of trade are the focus of the dis cussion.
Many of the benefits of trade have already been consumed by the United States, which has been running trade deficits.
The United States has been living better than it could have been because of trade.
It has been living better because of trade and outsourcing.
The United States will have to pay for some of the benefits that it already has when these IOUs are presented for payment.
The production possibility curve model doesn't give an answer as to what government's role should be in regulating trade, but it does serve an important purpose.
The idea of trade offs, opportunity costs, comparative advantage, efficiency, and how trade leads to 40 introduction # thinking like an economist is summarized in a geometric tool.
These ideas are important to economists.
The framework for those conversations is the production possibility curve.
Think of the production as the tough choices society has to make and imagine the economy as being on it.
Difficult trade-offs can be seen by the production possibility curve.
Some people don't recognize the trade-offs.
Politicians often talk about the production possibility curve not beingexistent.
They obscure the hard choices and increase their chance of being elected.
Economists point out that they do the opposite.
They promise little except that life is tough, and seemingly free lunches often involve significant hidden costs.
Political candidates who are reasonable tend to be elected.
One can produce the greatest amount of goods mum combination of outputs that can be obtained with which to trade.
A given number of inputs can be increased by doing so.
In general, in order to get more and more of something, we must give up economies, cultures, and institutions across the something else.
Because many goods are cheaper to produce in China and India, production that curve, trade allows people to use their comparative advan.
The rise of markets coincides with a decline in output.
The United States' strong comparative tion has contributed to the increase.
If it does not, there will be some adjustments in the relative curve that are efficient.
One has a comparative advantage if one specializes in producing goods for which it is cheapest to produce, because business's tendency to shift production to countries.
If neither country has a comparative advantage.
A rising trade-off as the grade in each 8 is demonstrated by a grade production possibility table and curve.
Does the production possibility model tell us anything?
In two hours, Just Born can make 30,000 Peeps or 90,000 Mike and Ikes.
The United States and Japan have something in common.
It is the law of one price.
Is it related to the movement a.
Thinking Like an Economist Questions from Alternative Perspectives 1.
The text makes it seem like the goal is maximizing output.
In what ways have vested interests used their power?
Adam Smith was worried about not a.
You are in this chapter.
If the benefit of reducing the ineffi possibility curve is taken into account, inefficiency is at a point inside the production impossible.
The secret of be eliminated by Groucho Marx.
Success is honesty and fair dealing if people use economic reasoning.
What would happen to society's possibility curve?
A research shows that after school jobs are highly corre trial worker.
The hourly cost to employers goes up when grade point averages go down.
Those who work in the U.S. have an average cost per work of $39, while those who work in Taiwan have an average cost of $10.
There are 21 hours or more that have a 2.7 grade point average.
Higher grades are, a.
There are three reasons why firms produce in Germany.
Germany has an agreement with other EU countries part-time in college, and that the return to a 0.1 increase that allows people in any EU country, including in GPA, gives one a 10 percent increase in one's lifetime Greece and Italy.
There is an argument for working rather than wage countries.