What are the implications for a small country in, say, South America, when we move from a system of global comparative advantage to one of regional comparative advantage?

Directions: Click on the link to read the article. Respond to each of the questions using a different color font.

Discussion Questions:

1.

What are the implications for a small country in, say, South America, when we move from a system of global comparative advantage to one of regional comparative advantage?

2.

What are other implications that arise from the “neighborhood effect?”

3.

Does the “neighborhood effect” mean that countries are necessarily more efficient than others? Why or why not?

Multiple Choice/True False Questions: (Highlight the correct answer.)

1.

Countries possess a comparative advantage in production when they can produce a good more efficiently than others.

  1. True

  2. False

2.

According to the article, comparative advantage in production is beginning to disappear as a criterion for location of a firm.

  1. True

  2. False

3.

As shipping costs increase the total production cost, the end prices of the goods will, all else constant,

  1. increase

  2. decrease

  3. not change

  4. there is not enough information to determine.

 
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