Lesson 1.3 Production

Tom and Tuyen

Tom and Tuyen

by Nguyen Xuan Bach (Tom) Can -
Number of replies: 0

1. Why did beef exports in the US drop so much?
Because of refrigeration, Argentina could export large amounts of frozen beef cheaply to world markets. They had lower production costs (cheaper land, labour, and feed) and a climate and geography well suited for raising cattle. As a result, Argentia became a more competitive exporter.
2. Who gained and who lost in this early example of globalization?
 Gained: Argentine beef producers and workers, shipping and refrigeration industries, and consumers in importing countries who got cheaper beef.Lost: US beef producers, workers in the US beef industry, and US communities that depended on beef exports.
3. What are the primary, secondary, and tertiary industries related to beef?

Primary: cattle ranching/farming. Growing animal feed(corn, soy, grass)

Secondary: Slaughterhouses and meat packing. Meat processing factories and packaging production.

Tertiary: Transportation and logistics. Wholesalers and retailers (stores, restaurants). Marketing and export services. Inspection and food safety services.

4. Suppose USA can make 100 thousand tons of beef or 50 thousand tons of corn, while Argentina can make 30 thousand tons of beef or 30 thousand tons of corn. How should the two countries trade? Why?

So let’s break this down

Suppose the USA uses all the resources for beef, and they can make 100k tons of beef

If it uses all the resources for corn, and they only make 50k tons of corn

So the opportunity cost of 1 beef = 0.5 corn (50 corn/100 beef)

The opportunity cost of 1 corn = 2 beef (100 beef/50 corn)

While Argentina uses all the resources for beef, and they can make 30k tons of beef

If it uses all the resources for corn, and they can make 30k tons of corn

So the ratio is 1:1 (1 beef:1 corn)

As a result, the US only gives up 0.5 corn to make 1 beef so the USA has a lower opportunity cost in beef so they should specialize in producing beef

And Argentina gives up only 1 beef to make 1 corn, so the USA has a lower opportunity cost in corn so they should specialize in manufacturing corn. Therefore, they should specialize and trade