International Trade Simulation Essay

946 words - 4 pages

International Trade Simulation"International trade is the exchange of goods and services between countries." (Heakal, 2007). International trade is helpful to the economy. The trade allows countries to exchange goods in order to have an assorted supply for the residents. The trade brings in supply which creates more demand and the economy grows.The international trade simulation shows the reasons for the international trade. The purpose of the simulation is to make decisions and study the outcomes. This is a three part simulation. The first part is to decide which countries to trade with. The second part is to decide which goods will be exported or imported. Finally the decision will be made on whether or not to impose trade restrictions.Advantages and Limitations of International TradeInternational trade has both advantages and limitations. An International trade advantage is that a country's wealth potential can be maximized. Supply and demand can increase. Unemployment can decrease. Overall economy can improve.International trade can have limitations. When the country imports more that the country exports an imbalance will occur. The country may have an excess in supply because the export rate is low. A limitation may be created through trade restrictions.Summary of SimulationIn the first scenario a determination needs to be made on whether or not opportunities are present for trade with the neighboring countries which are Alfazia, Uthania and Suntize. If an opportunity is present then a determination must be made as to what the composition of the trade will be. The commodities encouraged for export in this scenario were cheese and DVD players. The imports encouraged into Rodamia were corn from Uthania and watches from Suntize.On the first scenario the results of the simulation showed that the product to which export incentives needed to be given were properly identified. The simulation also stated that in the first scenario the products to import from Uthania, Suntize and Alfazia were correctly identified. The results of the simulation stated that the decisions made were completely in line with the opportunity costs of production of the products in the respective country.On the second scenario a determination must be made to assess whether or not a trade restriction should be imposed. The recommendation is to impose a tariff of $40 per unit.On the second scenario the results reflected that imposing a tariff was a good decision. The results also stated that the level of tariff imposed was appropriate. The 25% of the export price (which is the tariff), is equal to the dumping margin.On the third scenario a determination must be made to decide whether or not to impose an ad valorem tariff on the corn imported from Uthania and Alfazia for a short time. A second decision must be made if an ad valorem tariff is imposed. The decision would be to determine the level of the tariff. The decision made was to impose a tariff. The level of the tariff was...

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