International Economics

Global Markets and Competition 


3rd edition

Henry Thompson


Description          Introduction


This international economics text integrates micro and macro economics.  Graphs and exercises make the theory accessible.  Hundreds of boxed examples make the theory relevant.  The emphasis is on the gains from international competition and the limited scope of government policy.  


course syllabus











International Economics

Global Markets and Competition


International economics describes and predicts production, trade, and investment across countries. Wages and income rise and fall with international commerce even in the large rich developed US economy.  In many small less developed countries, international economics is the only game in town. 

Economics as a social science began in Europe in the 1700s in debates over free international commerce, and the debate continues.  This text develops the foundations of international trade and investment, including constant cost, neoclassical, factor proportions, and industrial organization theories of production and trade.  Government policies are designed to influence trade and investment for favored industries, and governments negotiate free trade and investment agreements. 

Theory is presented using graphs and numerical examples.  Numerous problems lead to a thorough understanding.  Over 250 examples illustrate the theory.  The text integrates issues of microeconomic trade, economic policy, and international finance and macroeconomics.  Emphasis is on the powerful forces of international markets and the ultimate limitations of government stopgap policy.









International Economics

Global Markets and Competition



























This text prepares you to anticipate how international economics will influence your business and personal life.  Countries have become more integrated through increased international trade, foreign investment, migration, and more efficient transportation and telecommunication.  The foreign exchange market is the largest market in the world.  Industries prosper and fail in the face of global competition.  International agreements such as the World Trade Organization (WTO), North American Free Trade Area (NAFTA), and European Union (EU) are becoming a fundamental form of government.

Government policy protects some favored industries from the pressures of international competition and subsidizes others for export, at the expense of everyone in the economy.  Tax policies are designed to hinder trade and investment. Government central banks interfere with the foreign exchange market.  Such policy maneuvers impede international commerce and lower average income in the economy.

This text focuses on the foundations of international economics in the system of international markets.  In microeconomics, an economy is a collection of interdependent markets.  In international economics, markets and economies are linked across borders.  International economics is based on the supply and demand for goods and services across countries. 

Comparative advantage is the basic tool for predicting the international pattern of production. The international supply of traded products is based on underlying production.  The production and trade of minerals and agricultural goods are based on geographical advantages.  For traded manufactured goods and services, capital is an important input that can be installed where there is labor and infrastructure.

Trade occurs due to the arbitrage of products from countries where prices are low to places where prices are high. Through arbitrage, traders make profit and products are more economically distributed.  International demand is based on income and tastes.  The interaction of international supply and demand determines production and trade.

The effects of trade depend partly on the types of industries involved, from competition to monopoly. Trade policies are designed to redistribute income toward some favored industry or group, altering the efficient pattern of production and distribution.  The costs of protection outweigh the benefits, but industry and labor groups lobby for protective tariffs and quotas because they stand to gain while others pay.  Politicians respond to lobby payoffs as well as political pressure.

International economics builds models to capture the essence of international commerce.  The fundamental scientific models of international economics have stood the test of time.  Models are tested and refined as more is learned about how the international economy works.

The graphs, examples, applications, and problems in this text are essential for learning.  There are hints for even numbered problems in the back of the book.  You will enjoy International Economics: Global Markets and Competition.






















Themes of International Economics: Global Markets and Competition are:

 The text is unique in several ways.

The text is appropriate for "service" courses for non-majors.  Numerous boxed examples make the text suitable for MBA students.  Technical points are made with numerical examples and graphs, avoiding "formulas" and algebraic symbols.  Classroom presentations should use diagrams and algebra.  The problems after each section and chapter are designed for learning and are classroom tested.  Hints for even numbered problems are in an appendix.  Students can be called on to answer or work problems at the board to get them involved.

You will be surprised at how well your students learn using International Economics: Global Markets and Competition.

















1. International Markets

A. International markets and prices

B. Excess supply and demand

C. The balance of trade

D. Comparative advantage and specialization

2. Trade with Constant Costs

A. Constant opportunity cost of production

B. Specialization and gains from trade

C. Extensions of constant cost trade theory

D. Applications of constant cost trade theory


3. The Gains from Trade

A. The production possibilities frontier and real income

B. Specialization with increasing costs

C. Economic development and trade

D. Industrial trade policy

4. Protectionism

A. Tariffs: Taxes on imports

B. Quotas and other nontariff barriers

C. Protection and production

D. Political economy of protection

5. Terms of Trade

A. Offer curves

B. Tariffs and the terms of trade

C. Tariff games

D. Nonrenewable resources


6. Production and Factor Proportions

A. Specific factors of production

B. Production with two factors and two goods

C. Four theorems of production and trade

D. Applying factor proportions trade theory

7. Industrial Organization and Trade

A. Price searching firms

B. Intraindustry trade

C. Oligopolies

D. Other trade models


8. International Labor & Capital

A. International migration

B. International investment

C. Migration, foreign investment, and income redistribution

D. Migration, foreign investment, and trade

9. International Economic Integration

A. Multinational firms

B. International externalities

C. International political economy

D. Steps of economic integration


10. Balance of Payments

A. Price elasticities and the trade balance

B. Current and capital accounts

C. Deficits and surpluses

D. International fiscal and monetary policy

11. Foreign Exchange Markets

A. Foreign exchange rates

B. Managed exchange rates

C. Foreign exchange trading

D. Foreign exchange risk

12. International Financial Markets

A.  International markets for loans

B.  Foreign exchange and finance

C.  International money

D.  Money and international finance

13. Open Economy Macroeconomics

A.  The micro foundations of macroeconomics

B.  Closed economy macroeconomics

C.  The open macroeconomy

D.  Inflation, exchange rates, and open economy macro policy