The push toward creating more regional trade agreements necessarily harms the multilateral liberalization process that is at the heart of the WTO
What will be an ideal response?
There are some economists, most notably Bhagwati, who would agree with this statement. They oppose regionalism because of the trade diversion it causes and because, they argue, regional agreements distract countries from the multilateral process. Others, including Krugman, argue that regionalism is a natural process, owing to regional cultural similarities and the economics of transportation costs. These agreements do not divert much trade, they contend, because trade tends to be regional anyway and because external barriers are low. Moreover, success in negotiating regional agreements may spur on multilateral talks.
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Refer to Figure 2-8. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of both pineapples and coconuts?
A) Costa Rica B) Guatemala C) neither country D) cannot be determined
Firms
a. are where entrepreneurs combine resources b. are economic units formed by profit-seeking entrepreneurs c. are assumed to try to maximize profit d. reward entrepreneurs with profits, which are sales revenue minus the cost of production e. All of the answers are correct.