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Occupational Health and Safety, Canadian Edition

15th Edition
by David L. Goetsch, University of West Florida and Oskaloosa-Walton Eugene Ozon, Algonquin College
1035 Solutions 49 Chapters 1481 Studied ISBN: 0133450244 Computer Science 5 (1)

Chapters 39W: DQ 10

10. What types of products do the DVCs typically export? How do those exports relate to the law of comparative advantage? How do tariffs by IACs reduce the standard of living of DVCs?


Step-By-Step Solution

10. What types of products do the DVCs typically export? How do those exports relate to the law of comparative advantage? How do tariffs by IACs reduce the standard of living of DVCs?

Answer: DVCs export primarily raw materials and agricultural goods to IACs in return for imported manufactured goods and services. This pattern of trade follows from the law of comparative advantage. As far as the extraction of nonrenewable resources is concerned, past depletion of deposits in the IACs has meant that DVCs are often the lowest-cost producers of these goods. As for renewable resources such as agricultural products, the production of these goods is usually labor intensive. The large pools of low-wage labor in DVCs give them a comparative advantage in many of these products.

It is important to note that the law of comparative advantage does not necessarily consign DVCs to be raw materials exporters forever. The production of many manufactured goods is also fairly labor-intensive, giving DVCs an opportunity to become low-cost producers and hence exporters of these products. Many have already begun to develop thriving manufacturing sectors based on this cost advantage, and if trade barriers in IACs continue to be lowered this trend will be intensified, living standards will rise and more efficient use of world resources results. Tariffs by IACs can reduce the standard of living in DVCs by making DVCs exports less competitive, thus reducing trade opportunities.


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