International trade operations Essay Example | Topics and Well Written Essays - 750 words

International trade operations - Essay Example Since 2000 however, although the revenues from exports to EU have increased, its share has decreased with respect to total exports. With respect to the other industries such as cement and manufacturing, the theory is not applied. Therefore, the theory has been able to account for trade patterns with the EU-15 countries until 2000 with respect to the timber industry. The Heckscher – Ohlin theorem explains a country’s production characteristic by taking into account the various factors of labour, land and capital. A country is hypothesized to abundantly produce and export those types of goods that conform to its strengths, being either capital intensive or labour intensive. Moreover, similar to the theory of comparative advantage, the country need not necessarily have a particular resource in abundance; it only needs to be abundant with respect to the other resources. After taking into account, the various features of the country’s economy and resources, the writer applies the theory to the timber industry. Latvia’s high land ratio relative the population is used to explain the high percentage of timber exports as being a land – intensive product. Therefore, it seems to be quite satisfactory. However, when the case of countries such as Sweden and Finland is considered, the theory fails since they have lower population densities than Latvia. Once again, this theory is also not applied to other industries. In addition, both the theories deal with comparative advantage but do not have an account of changing comparative advantage of a nation or the future direction of the economy of a nation with respect to its strengths. 2) While both of the theories are able to explain some of the patterns of trade in a certain time period applied to a single industry, it might be argued that any theory of international trade will be able to do this (Zhang, 2008, p.71). The requirement of a theory is that it must be able to account for a majority of the factors that influence an economy. Its success is therefore determined by its proximity and applicability to practical situations that are very complex rather than explaining simple models. Hence, the theories can be considered as guiding principles upon which more complex theories of international trade are built upon. At the same time, it is not possible for a theory to account for all of the changes over a long period of time and must be constantly updated. The theories have provided a starting point for development of more inclusive models. An important trait of a theory is that it is able to simplify the various factors that it deals with. For this purpose and for academic analysis, complex practical situations are often isolated and studied independently of the other. However, the application of the traditional theories of comparative advantage and that of the Hecksher – Ohlin model has proved that they have been successful only in certain conditions. As economie s around the world and the factors influencing them have become numerous and more complex, a need for a more effective theory(s) that incorporates many of these factors has grown. Therefore, the writer has been ambitious in concluding that the theories have been able to corroborate findings with respect to the Latvian economy and its trade partners. However, the article provides a considerable amount of information that is useful to the Latvian

Monopoly and Competitiveness Research Paper Example | Topics and Well Written Essays - 1250 words

Monopoly and Competitiveness - Research Paper Example 2. Competition- a perfectly competitive firm has no control on the competition as the entry and exit of new firms is not restricted. However a monopolist firm being dominant in its market can create entry barriers for new firms. 3. Supply and demand curves- a perfectly competitive firm faces a horizontal demand curve and an upward sloping supply cure. While in the case of monopoly firm it faces a downward sloping demand curve and its supply curve is dependent on the marginal cost and marginal revenue (as seen in the graph below). 4. Profit- maximizing output- a perfectly competitive firm maximizes its profit at the point where its marginal cost equals marginal revenue which in turn is equal to the equilibrium price. Whereas a monopoly firm maximizes its profit at the point where marginal revenue equals marginal cost and vertically locates the supply quantity on the demand curve (as seen in the graph below). A2. Schumpeter has tried to elaborate and improve the definition of monopoly. The term has been misinterpreted and misunderstood continually. It is regarded as a taboo which equals to oppression and savage exploitation of resources. But it is important to understand that monopoly evolves mainly due to the large-scale structure of a business. This in turn is achieved by hard work and outstanding performance. Though he does not deny that there have been instances when the production is not improved despite the large-scale domination of the monopoly but this is not enough for backing up the common generalization associated with the term. According to him a single-seller position gained by either patent or monopolistic strategy can not be termed as exploitation as in most cases they are innovators. They bring in the new commodities and build their markets. In the case of perfect competition, where the market forces in equilibrium are disturbed by some external factor, then under old views it is assumed that the market itself reaches the new equilibrium. But in reality it might take the market farther than the new equilibrium than stabilizing it. Another common notion about the perfectly competitive market is that, it is free of wastage of resources and inefficiencies. This in fact tumbles when considering the fact that a large-scale business can produce a similar product with the same resources but with improved technology, quality, usability etc. and these are the reasons for why it charges a