2. APPLIED MICRO ECONOMICS: INTERNATIONAL TRADE AND GOVERNMENT Chapter 5 Matakuliah: F0882 - Economic Analysis Tahun: 2009

3. Bina Nusantara University 3 Learning Outcomes The Nature of International Trade Comparative Advantage among Nations Protectionism Government Control of the Economy Government Expenditures Economics Aspects of Taxation Antitrust Policy

4. The Nature of International Trade International vs. Domestic Trade 1.Expanded trading opportunities 2.Sovereign nations 3.Exchange rate The Sources of International Trade In Goods and Services 1.Diversity in Natural Resources 2.Differences in Tastes 3.Differences in Cost Bina Nusantara University 4

5. Comparative Advantage Illustrated

6. With Many Commodities, There Is a Spectrum of Comparative Advantages

7. Triangular Trade Benefits All

8. Protectionism 1.Supply and Demand Analysis of Trade and Tariffs  Free Trade vs. No Trade, Trade Barriers, The Economic Cost of Tariffs 2.Tariffs create economics inefficiency. When tarrifs are imposed, the economic loss to consumers exceeds the revenue gained by the government plus the extra profits earned by producers. Bina Nusantara University 8

9. Effect of a Tariff

10. Economic Cost of a Tariff

11. Government Taxation and Expenditure The Tools of Government Policy 1.Taxes 2.Expenditures 3.Regulations. Bina Nusantara University 11

12. Government’s Share of the Economy Has Grown Sharply Chapter 16 Figure 16-1

13. Government Spending Is Highest in High- Income Lands, 1999

14. The Functions of Government 1.Improving Economic efficiency 2.Reducing economic inequality 3.Stabilizing the economy through macroeconomic policies 4.Conducting international economic policy. Bina Nusantara University 14

15. Antitrust Policy