Chapter 5: Q4. (page 223)
What is the source of Li & Fung’s success? Is it based on human capital, on ownership of a natural resource, or on ownership of capital?
The Li & Fung success is based on human capital
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What effect do you think the strike will have on Mexican grape producers? Mexican grape pickers? Mexican grape consumers? U.S. grape pickers?
What principle do you think underlies Li & Fung’s decisions on how to allocate production of a good's inputs and its final assembly among various countries?
Why do you think a retailer prefers to have Li & Fung arrange international production of its jeans rather than purchase them directly from a jeans manufacturer in mainland China?
In 2015, the United States proposed a tariff on steel imports from China. Steel is input in a large number and variety of U.S. industries. Explain why political lobbying to eliminate these tariffs is more likely to be effective than political lobbying to eliminate tariffs on consumer goods such as sugar or clothing.
Due to a strike by truckers, trade in food between the United States and Mexico is halted. In autarky, the price of Mexican grapes is lower than that of U.S. grapes. Using a diagram of the U.S. domestic demand curve and the U.S. domestic supply curve for grapes, explain the effect of the strike on the following.
a.U.S. grape consumers’ surplus
b.U.S. grape producers’ surplus
c.U.S. total surplus
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