Summary of opportunity cost theory of international trade

1.	Summary of opportunity cost theory of international trade
Answer» The opportunity cost of anything is meant the loss involved of some other commoditywhich could have been produced instead. The opportunity cost theory of international trade TELLS us that if a country can produce either COMMODITY Y orZ, the opportunity cost of commodity Y is the amount of the other commodity Z that must begiven up in order to get ONE additional UNIT of commodity Y. So, the exchange ratiobetween the two commodities is expressed in terms of their opportunity cost. The concept ofopportunity costs has been shown in international trade theory with the help of production possibilitycurve (PPC) The opportunity cost theory analyses pre-trade and post-trade situation under constant,increasing and decreasing opportunity costs Thus, the opportunity cost theory is superior to theclassical comparative cost theory on analytical GROUNDS.

Answer»

The opportunity cost of anything is meant the loss involved of some other commoditywhich could have been produced instead.

The opportunity cost theory of international trade TELLS us that if a country can produce either COMMODITY Y orZ, the opportunity cost of commodity Y is the amount of the other commodity Z that must begiven up in order to get ONE additional UNIT of commodity Y.

So, the exchange ratiobetween the two commodities is expressed in terms of their opportunity cost. The concept ofopportunity costs has been shown in international trade theory with the help of production possibilitycurve (PPC)

The opportunity cost theory analyses pre-trade and post-trade situation under constant,increasing and decreasing opportunity costs Thus, the opportunity cost theory is superior to theclassical comparative cost theory on analytical GROUNDS.

Discussion

No Comment Found

Related InterviewSolutions

Advantages of suitability
Advance matrix system in direct selling bussines
Explain in detail the merits and demerits of E-business?
Aryn is a music fan, and she enjoys learning about how speakers and sound systems are wired. She is reading books about electrical circuits, and she has decided she would like to work as an electrician on construction projects to help build new homes. However, she does not want to go to school for very long after finishing high school.What type of training would best prepare Aryn for working in construction without needing many years in school?an apprenticeship done on the joba bachelor’s degree in engineeringa physics class during her last year of high schoolan after-school program about power tools
Which type of worker has a career that can be important in both maintenance/operations services and construction services?mechanical door repairersplumberssurveyorsconstruction managers
We discussed several methods for collecting job analysis data—questionnaires,the position analysis questionnaire, and so on. Compare and contrast these methods, explaining what each is useful for and listing the pros and cons of each.
4) Vijay2009June -1 Vijay started business with cash 10,000, building 1, 50,000 and bank balance43,0003 purchased goods worth Rs. 21,000 on credit from Avinash with TradeDiscount @ 5%5 sold goods for cash Rs.3, 600 wide cash memo No. 1 to 5.7 paid salary 1,000.10 goods costing 300 were distributed as free samples.13 paid insurance premium for goods 250 and for the life of the owner 300 boththese payment were made by cheque.15 invested Rs. 3,000 by cheque in shares of Tata Steels Limited,24 settled Avinash A/C by issuing a cheque of the necessary amount afterdeducting Cash Discount 2%.29 sold goods on credit for Rs.8,000 to Ketan.30 Ketan returned 1/10 of the goods since they were defective.
Pon25. Duration is a concept that is useful in assessing a bond'sA. credit riskB. liquidity riskC. Interest rate riskD. Cash risk
Explain the importance of management principles.
CASE STUDY 2.4QuestionірThe two friends, Soniya and Raman started a businessby the name of 'Soniyo Fancy Dress Shoppy'. Both of17them invested equal capital in the business. At thera start of the business, Soniya had placed one conditionbefore Raman that if unfortunately they suffered aof heavy loss in their business, she would not be able togive anything except the capital invested in thebusiness, Raman had accepted this condition on theinterms and condition that Soniya would not enjoy theright to participate in the management of the firmTheir business was gradually growing well and theywere fully satisfied with their business,(a) To what form of business organisation isconcerned the above para?(b) Identity and explain the type of the form of3 marksorganisation identified in (a).al