Capital Goods and Land, Labor, Capital, and Entrepreneurship - Essay Example

1) If a country wants to expand its economy, then it needs to shift its focus away from the production of consumer goods and focus more on capital goods. This will result in an outward shift of the PPF curve.

2) The reason why countries such as Costa Rica and Bangladesh are better placed to produce shirts and then export them to the United States is because of their competitive advantage, not absolute advantage. Let’s use Vietnam as an example. The wages that have to be paid to Vietnamese workers are far less than those that would be expected by American workers. This means that America should import goods such as shirts from third-world countries because they can be produced far cheaper. Even with the added costs of transportation, this option is still better than America producing the goods domestically. So even though the United States has an absolute advantage in almost every good, it makes logical sense for them to outsource work that can be done cheaper somewhere else.

3) The reason why countries such as China and India use manual laborers is that it is cost-effective to do this in those countries. Also, these countries may not have the same technological expertise to produce machines to do the work for them. Even if this is the case, the average wage is so low that it does not cost very much to pay for human workers. On the other hand, in the United States, the minimum wage is so great that it would be too expensive to have to pay individual laborers to perform the work. Also, the United States is a technologically advanced country and can thus produce street cleaning machines to do the work. The total cost of making and using these machines is probably less than what it would be to have to pay manual laborers; thus it makes sense to use heavy street cleaning machines.

4) The reason why there is so much opposition to international trade is that some people argue that it hurts the local economy because of the loss of jobs for home workers. While international trade can be a good thing for the economy as a whole, it may not be so great for the individual worker who gets laid off. The reason why a worker may lose their job is that there will always be someone who can perform the same job for cheaper wages somewhere in the world. This inevitably leads to a higher unemployment rate in the home country. Read More