Question

The company's shipments of newly-produced branded and private-label footwear from its plants to its regional distribution centers are subject to

a. any applicable import tariffs and exchange rate adjustments.
b. shipping charges of $2 per pair on all pairs shipped from one region to another region and exchange rate shifts of as high as 15%.
c. tariffs of $8 per pair and shipping fees of $1 per pair.
d. export fees equal to 10% of the manufacturing costs of the pairs shipped and exchange rate shifts of as high as 25%.
e. 3-million pair import quotas on shipments from foreign plants to Europe-Africa and Asia-Pacific and exchange rate shifts of as high as 20%.

Answer 1

International trade allows countries to specialize in producing goods where they have a comparative advantage. By doing so, countries like the United States and Mexico can increase their total production and consume more goods than they would in isolation, benefiting from trade restrictions that facilitate a balanced exchange of goods.

Step-by-step explanation:

When countries engage in international trade, they often specialize in producing goods for which they have a comparative advantage. This means they produce goods that they can create more efficiently compared to other goods or countries. For example, in a scenario where the United States and Mexico adjust their production towards goods they are better at producing, they both end up with a net increase in production. The U.S., by shifting labor from shoe production to refrigerators, can increase refrigerator production by 6,000 units while reducing shoe production by 1,500. Conversely, Mexico can compensate for this reduction by increasing their shoe production by 2,000 pairs and decreasing refrigerator production by 2,500 units.

Such adjustments lead to both countries producing more of what they are good at, and by setting trade limits—for instance, the U.S. exporting fewer than 6,000 refrigerators and importing at least 1,500 pairs of shoes—they ensure an exchange that benefits both parties. The overall effect of specializing according to comparative advantage is that each country can consume more goods than it would without trade, assuming they comply with set import and export restrictions, like the United States not exporting more than 6,000 refrigerators or importing less than 1,500 pairs of shoes from Mexico.