A22 Questions

1. What are they Why is traded seek explanations beyond the theory of comparative advantage. How should be the policy under these new explanations. According to the author of the classic theory makes no sense, but it is indisputable that happens: The reality is that the bulk of international trade occurs in the first place among developed countries, where none has a clear comparative advantage among the same industries (interindustry trade), for example, the European Union countries buy and simultaneously sell cars and equipment can remain true to the United States. 2.Why the author notes that the theories are valid it is necessary to fulfill any number of restrictive assumptions, whose relaxation leads to some of the conditions of new trade theories For that perfect competition is a reality must be satisfied a number of assumptions: there must be no barriers to entry into the industry, offering good all companies should be uniform and must have perfect information and should not be any market power ie, no buyer and no seller should be able to influence the market price of the property. The author mentions this because it is necessary to comply with these assumptions for the traditional theory is functional, given the fact that this can not be possible, the author argues that the traditional theory can not work or provide a solution to international trade, but corrections should be made and consider the imperfections implicit in the traditional theory. 3.What is the prediction that the author says about the assumptions of new trade theories Barriers to entry are one of the prerequisites for considering a sector as strategic. Barriers to entry as that which enables companies to achieve extraordinary profits established by raising the price above the competitive level without inducing new firms to enter the sector. What is the importance that the author says about intra-industry trade The author mentions that there are four essential points that serve the intra-industry trade which are: Barriers to entry Economies of scale Learning curves Investment in R D The limit price model. 4.What are the strategic sectors and how they influence the way they are marketed This criticism really means that there are strategic sectors. If some sectors are enhanced others are harmed, so it would be better off letting the market and the market alone who selects which sectors are winners and which are not, is the classical liberal idea that any intervention distorts and it is unfair to the sectors not selected: it would be better then laissez faire.