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Comparative advantage and Factors of production
The law of comparative advantage is the driving desire behind
international trade. It refers to the ability of a country to
produce a particular good or service at a lower marginal cost and
opportunity cost than another country. It basically describes the
ability to produce a product more efficiently given all the other
products that could be produced. You may have it contrasted with
absolute advantage which refers to the ability of a person or a
country to produce a particular good at a lower absolute cost than
NOTE: The theory of comparative advantage best explains how
trade can create value for both parties even when one can produce
all goods with fewer resources than the other. The net benefits of
such an outcome are being referred to as the gains from trade.
The balance of trade (aka net exports) refers to the difference
between the monetary value of exports and imports of output in an
economy over a certain period. It is, simply put, the relationship
between a nation's imports and exports. A favorable balance of
trade is a trade surplus while an unfavorable balance of trade is
known as a trade deficit.
Factors of production deal with those resources employed for
producing goods and services. They facilitate production but do
not become part of the product or are significantly transformed by
the production process. Certain factors of production such as
capital and labor are typically more mobile within a country than
across countries. Therefore, international trade is often more
restricted to trade in goods and services, and only to a lesser
extent to trade in capital, labor or other factors of production.
In fact, trade in good and services can serve as a substitute for
trade in factors of production. Rather than importing the factor
of production, a country can simply import goods that make
intensive use of the factor of production, for the purpose of
embodying the respective factor.
Borderless selling describes the process of selling services to
clients outside the country of origin of services through modern
methods capable of eliminating the actions specifically designed
to hinder international trade. International trade through
"borderless selling" is primarily a phenomenon born in the
The ability to assess the "environmental" factors in international
trading is critical, that taking account of cultural, economic and
political differences is a must when dealing with different market
places of the world.
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Tariffs and Duties
Tariff systems are usually put in place for providing either a
single rate of duty for each item applicable to all countries, or
two or more rates, applicable to different countries or groups of
countries. Tariffs may be grouped into two broad classifications.
A single-column tariff is the simplest type of tariff which
consists of a schedule of duties in which the rate applies to
imports from all countries on the same basis. With a two-column
tariff, the initial single column of duties is supplemented by a
second column of "conventional" duties which show reduced rates
agreed through tariff negotiations with other countries. A
preferential tariff is a reduced tariff rate that is applied to
imports from certain countries. GATT prohibits the use of
preferential tariffs with the major exceptions of certain
historical preference schemes.
Customs duties are of two different types, which are calculated as
a specific amount per unit or specific duty, or as a percentage of
the value of goods or ad valorem, or as a combination of both. Ad
valorem duties are expressed as a percentage of the value of
goods. Specific duties are expressed as a specific amount of
currency per unit of weight, volume, length or number of other
units of measurements. Alternative duties have both ad valorem and
specific duties set out in the custom tariff for a given product.
Compound or mixed duties provide for specific plus ad valorem
rates to be levied on the same articles.
Anti-dumping duties are special. They take the form of special
additional import charges designed to cover the difference between
the export dumping price and the "normal" price, which usually
refers to the price paid by consumers in the exporting countries.
Variable import levies have the goal of raising the price of
imported products to the domestic price level. Temporary import
surcharges are often used from time to time for providing
additional protection for local industry and, in particular, in
response to balance of payments deficits.
A trade barrier refers to any government policy or regulation that
restricts international trade. The barriers can take many forms.
Tariffs and duties are the most common barriers.
A trade war is said to be taking place when two or more nations
raising or creating tariffs or other trade barriers on each other
in retaliation for other trade barriers.
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You may define management control as a systematic effort by
management to compare performance to predetermined standards,
plans, or objectives in order to determine whether performance is
in line with these standards and presumably in order to take any
remedial action required to see that human and other corporate
resources are being used in the most effective and efficient way
possible in achieving corporate objectives. You may also perceive
it as the function of the business management system that can
adjust operations as needed to achieve the plan, or to maintain
variations from system objectives within all allowable limits.
The basic elements in a control system include as a minimum the
following: (1) the characteristic or condition to be controlled,
(2) the sensor, (3) the comparator , and (4) the activator occur
in the same sequence and maintain a consistent relationship to
each other in every system. The first element is the
characteristic or condition of the operating system which is to be
measured. The second element is a means for measuring the
characteristic or condition. The third element is for determining
the need for correction by comparing what is occurring with what
has been planned. The fourth element refers to the corrective
action taken to return the system to the expected output.