Using Kahoot! & Popular Literature
to Introduce International Trade
Ying Zhen, Ph.D.
Assistant Professor
Department of Business and Economics
Wesleyan College
1
Your Views about International
Trade: Using Kahoot!

Kahoot! is a free game-based platform that enables
playful and interesting learning experiences in the
classroom. Students can use any electronic device to
go to its website and enter the game pin assigned by
the instructor. Then they can have surveys, warm-up
quizzes, etc. in a very entertaining way. It is a great
example of connected learning.


Step 1: Go to https://kahoot.it
Step 2: Enter the Game Pin shown on the screen
(assigned by the instructor)
Step 3: Using your electronic device to choose the
right answers.

Kahoot.it Questions
 Your
Views about International Trade
Questions:
Which country below is NOT in the top 3 of
United States' trading partners?
 Exports are good as they create jobs, while
imports are bad as they give jobs to foreigners.
 It does NOT make sense for big & rich countries
to trade with small & poor countries.
 There should be no trade of cars & toys b/w US &
UK, if US is more productive in producing both

Why Do Countries Trade???
Popular Literature: A Development of
Classical Theory of International Trade

Mercantilism: Older than Smith—and Alive Today!
(esp. in the U.S.)
Adam Smith’s Absolute Advantage Model
 David Ricardo’s Comparative Advantage Model

Mercantilism

A system of government policies and institutions
aimed at increasing exports and decreasing imports.

The source of a country’s wealth is gold or money.

Two means of increasing a country’s wealth are
colonialism and international trade.
A country must export more and import less.
 Trade is a zero-sum activity

Adam Smith

Argued that mercantilism lowered a country’s
standard of living.

The importance of national production and exports
is only indirect: they provide the income to buy
products to consume

Advocated free international trade. Trade is
positive-sum activity.

Emphasized advantages of specialization and
international division of labor whereby nations
specialize in the production of only a few goods.
Adam Smith’s Absolute Advantage Model
Absolute Advantage as a Basis
for Trade
David Ricardo’s Law of Comparative
Advantage

Comparative Advantage and Opportunity Cost
Absolute advantage The ability of an individual, a firm, or a country to
produce more of a good or service than competitors, using the same
amount of resources.
Comparative advantage The ability of an individual, a firm, or a
country to produce a good or service at a lower opportunity cost (i.e.
a lower sacrifice) than competitors.
Opportunity Cost: The Value of Your 2nd Best Choice (this is how
your sacrifice is measured).
Adam Smith’s Principle

Per Unit Gains from Specialization When Country A Moves
to Specialize in Soybeans (S), and Country B in Textiles (T)
Summary: Adam Smith

Countries in the world differ in their ability to
produce various goods

World output will increase if countries
specialize in their absolute advantage
products.

This situation is the natural outcome of
market forces combined with free trade. A
good is cheapest in the country that has
absolute advantage in its production.
What if one country has A.A. in both goods??
 David
Ricardo:
Countries should specialize where they have
their Comparative Advantage!!
--The Law of Comparative Advantage
What If One Country Has Absolute Advantage
in Both Goods?
Comparative Advantage in International Trade
An Example of American Workers Being
More Productive Than Chinese Workers
OUTPUT PER 1,000 HOUR OF WORK
COMPUTERS
IPHONES
U.S.
12,000
6,000
CHINA
2,000
4,000
Comparative Advantage in
International Trade
The Opportunity Costs of Producing Computers & iPhones
The table shows the opportunity cost each country faces in producing computers and iPhones. For
example, the entry in the first row and second column shows that U.S. must give up 2 computers for every
iPhone it produces.
OPPORTUNITY COSTS
U.S.
CHINA
COMPUTERS
IPHONES
0.5 iPhones
2 Computers
2 iPhones
0.5 Computers
How Countries Gain
from International Trade
Production/Consumption
without Trade
PRODUCTION AND CONSUMPTION
BEFORE TRADE
COMPUTERS
IPHONES
U.S.
9,000
1,500
CHINA
1,500
1,000
Production without Trade
PRODUCTION
COMPUTERS
U.S.
CHINA
IPHONES
12,000
0
0
4,000
Consumption after Trade (Trade Agreement: U.S. Exports 1,500 Computers for 1,500 iPhones
from China)
CONSUMPTION AFTER TRADE
COMPUTERS
U.S.
CHINA
IPHONES
12,000-1,500=10,500
1,500
1,500
4,000-1,500=2,500
Summary
The basis for trade is comparative advantage, not
absolute advantage.
 Individuals, firms, and countries are better off if they
specialize in producing goods and services for which
they have a comparative advantage and obtain the other
goods and services they need by trading.
!!! They can CONSUME more after trade!
THIS EXPLAINS WHY U.S.-CHINA TRADE IS A WINWIN GAME!!

***Applications of Comparative Advantage:
1) OUTSOURCING!
Video: Is Outsourcing bad for the U.S.?
https://www.youtube.com/watch?v=e5wODB9hgRw
2) WHY PEOPLE GET MARRIED/DIVORCED?
Comparative Advantage:
Marriage vs. Divorce
Production, Specialization,
and the Gains to Marriage



Only marry if expect to be better off than if remain
single.
Use model from international trade: benefits of
specialization and trade.
Economic model: based on men and women with
comparative advantages (in terms of sacrifices) in
home and paid labor market.
Risks of Specialization

Life-cycle changes: advantage changes as individual ages
(kids grow up), etc.

Women who specialize and then re-enter the paid
workforce find earnings potential has fallen. This is risky
given high probability of divorce.
◦ Reduces incentives to specialize.
◦ Both occur simultaneously:
  specialization   divorce.
 divorce   specialization;
 VICIOUS CIRCLE!!!