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Copy of Globalization & Free Trade

the title basically

Cory Caudill

on 22 November 2013

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Transcript of Copy of Globalization & Free Trade

International Free Trade
What is Free Trade?
What is Free Trade?
Trade Agreements
Pacts made between countries in order to get the most out of trades and investments and to make it easier for said countries to do business with each other.
Soon after FTA was implemented, trade alliance between Mexico, USA and Canada began discussions
Put into effect on January 1st 1994, replacing FTA.
Area encompassing NAFTA is the largest free trade area in the world
amma why am i ugly
-said the ugly sibling
Definition: A trade restriction that taxes imports
Why: Protect domestic business
Definition: A trade restriction that prevents all trade

Definition: A trade restriction that limits the number of products that are allowed into the country to a certain number.
Example: The United States limits raw sugar imports to 3 billion pounds a year (15% of American consumption) . Supply is limited which means the price of US sugar is _________________.
In the United States, why do we trade?
What would life be like without international trade?
We would drink soft drinks only from bottles, since we import all of the bauxite needed to make aluminum. Oil rigs in Texas, Oklahoma, and Alaska would never reach paydirt since there is no domestic supply of the industrial diamonds needed for the drills. And July Fourth would fizzle since we get all of the strontium for our fireworks from Mexico.
We currently import more than 80% of the shoes we wear. It’s all but impossible to find an American-made television. And well over half of the oil we need to drive and lube our cars and machines comes from abroad.
A countries decision to specialize in the production of a certain good or list of goods because of the advantages it possesses in their production
Opportunity Cost
What you sacrifice when making an economic decision. If you want low opportunity cost you will make a decision in which you sacrifice the least opportunity.
Who has the lowest opportunity cost?
A) A person with a high school GED who decides to be a fry cook at McDonalds instead of doctor.
B) A person with a PHD who decides to be fry cook instead of a doctor.
Who has the lowest opportunity cost?
A) A country who has the worlds largest oil reserve who decides to specialize in exporting electronics
B) A country who has the largest oil reserve who decides to specialize in exporting oil
Comparative Advantage
A country's ability to produce a particular good with a lower opportunity cost than another country.
A country will produce goods which they have to sacrifice the least amount of costs.
Who has the comparative advantage?
2 countries are producing dress shirts.
Country A has plenty of cotton fields and skilled laborers who demand high wages.

Country B has plenty of cotton fields and unskilled laborers who can be paid lower wages.
A rabbi and a priest are in a field of strawberries dotted with tall apple trees. In order to meet their Maker, they must thoroughly harvest their hectare. The priest is 7 feet tall; the rabbi is 5 feet tall. Who should do what?
The rabbi is vertically-challenged so he has a comparative advantage picking things low whereas the priest is high so he may pick unforbidden fruit.

Free Trade
Trade without any restrictions or interference by the government.
Full transcript