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Chapter 20: Q. 10 (page 493)

What factors does Paul Krugman identify that

supported expanding international trade in the 1800s?

Short Answer

Expert verified

The factors that supported expanding international trade in thiswere:

  1. Construction of Suez canal
  2. Construction of Union Pacific Railroad.
  3. Laying down of the first submarine telegraph cable under the Atlantic Ocean.

Step by step solution

01

Step 1. Meaning of International Trade.

The exchange of goods and services across international borders or territories is called international trade.

02

Step 2. The different factors

The factors that supported expanding international trade in thiswere:

  1. Construction of the Suez canal - Suez canal provides the shortest sea route between the eastern and the western worlds. It plays a major role in lowering the price of goods and their easy and fast shipment.
  2. Construction of Union Pacific Railroad - It enabled freight transportation to areas which would have taken months and a higher cost.
  3. Laying down of the first submarine telegraph cable under the Atlantic Ocean - The transfer of message between North America and Europe was faster.

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Most popular questions from this chapter

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.

Brazil can produce 100pounds of beef or 10autos. In contrast, the United States can produce 40pounds of beef or 30autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

Consider two countries: South Korea and Taiwan.

Taiwan can produce one million mobile phones per day at the cost of \(10 per phone and South Korea can produce 50 million mobile phones at \)5 per phone. Assume these phones are the same type and quality and there is only one price. What is the minimum price at which both countries will engage in trade?

Are the gains from international trade more likely to be relatively more important to large or small countries?

What is intra-industry trade?
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