Price Of Foreign And Domestic Goods example essay topic

The Choice Report 1. Page 10. "Couldn't they exchange the yen for dollars at a bank?" In this fallacy David had been describing how the company Merck accepts Japanese currency for the pharmaceutical drugs they send. In return, American's use that Japanese currency to buy Japanese products. Ed wants to know why someone can't just exchange that money for U.S. dollars. David clarifies that one can exchange for dollars, but only because someone else wants to buy Japanese goods which requires the yen.

If someone didn't want the things from Japan they would not exchange currencies. However, what is really happening here is that the currency is making it easier to swap products, drugs for televisions. 2. Page 15.

"But if the Japanese had stayed poor America would have become even richer". In this statement Ed is trying to figure out why the U. S would want Japan to become so wealthy. He looks at it as a threat that has kept America from being as wealthy as they could be. What Ed forgets to consider is that the amounts of wealth in the world is not fixed. In actuality, the success of Japan allows America to specialize in other areas which can prove to be more profitable. 3.

Page 19. "But I thought the roundabout way of making cars through free trade preserved jobs - we didn't lose them". It is true that the American automobile industry is hurt my foreign competitors. A town like Clarksville once employed many people in that industry but not anymore. Once again he fails to see that big picture.

Although Clarksville lost many jobs America as a whole did not. In fact the overall number increased due to the emersion of jobs in new areas, i.e. computers. 4. Page 37.

"Come on, Dave. How can a $25 loss not be somebody's $25 gain?" Due to tariffs, the prices of products go up. With this increase in price Ed think that the buyer loses this extra cost while the producer benefits from it. What really happens is that this tax on foreign goods will increase the demand for domestic goods. But the price of this domestic good goes up as well. Due to the increase in demand, domestic companies will expand but this process to be even more costly.

In the end the total number bought by people in your country falls, even though production is up because the cost is higher. 5. Page 45. "Why can't the expansion of American production make up of for the lost foreign imports caused by the quota?" Ed believes that by putting a limit on the amount of goods a foreign country can send over, domestic production can increase to make up for the overall difference in totals. Once again like with tariffs, a quota increases the price of foreign and domestic goods.

Due to this increase American production expands, but this can never produce enough to account for the reduction in foreign supply. Just like a tariff the effect is a decrease in supply and a higher price for both domestic and imports. 6. Page 66. "If the other guy won't let our products into his country, why should we let his products into ours?" This fallacy touches on the fact that it seems unfair to import a country's products and support them if they wont return the favor by importing our goods.

In reality, by importing their goods we are benefiting. On the other hand, by not importing our goods they are hurting themselves because they are forcing their citizens to pay higher prices because they are devoting unnecessary resources, materials, people, and money to produce goods they could import at a lower cost. 7. Page 83. "Wouldn't American firms move their factories to Mexico to take advantage of cheap Mexican labor if there were no tariffs on Mexican goods coming into the U. S?" Here Ed is suggesting that tariffs still might be good because if the workers in Mexico work for much less, why would companies keep their factories in the U. S where they have to pay higher salaries? On the surface this looks like an easy answer.

But Ed fails to take in to consideration that the average worker in Mexico doesn't have the knowledge, skills, or productivity that the average U.S. worker has. Therefore, it isn't always cheaper in the long-run to move factories there.