International economics Assignment Example | Topics and Well Written Essays - 750 words

International economics - Assignment Example Fagnusson says that once the product is acquired abroad, they are labeled by the apparel company to ensure that they command brand identification after which they are sold either in the domestic or foreign markets (103). This scenario attests to the fact that cost of production is important element in making strategic production choices. When Spain opens its borders to the large number of unskilled Africans seeking to immigrate, they gets access to cheap labor. Suppose Spain was to open its borders to the large number of unskilled Africans seeking to work there, it is likely to benefit from cheap labor. Unskilled labor is cheap because these people do not possess any skills; hence they lack the bargaining power in the market. When skilled labor is acquired cheaply, the implication is that the overall cost of production becomes cheaper (Salvatore 221). The fact that Spain allows influx of unskilled labor in the market implies that the country will enjoy a comparative advantage in its production. Comparative advantage refers to the ability of a country to produce goods or services at a lower marginal cost and opportunity cost over the other. Spain stands to benefit greatly in international trade because it enjoys absolute advantage in its production because of cheap labor. For instance, if Spain decides to import skilled labor for manufacturing sector, then it enjoys absolute advantage in production of manufacturing products. Spain, therefore, stands in a good platform to exploit its comparative advantage since it concentrates in the production of manufactured goods for export; and since it can import other goods or services, which it does not enjoy comparative advantage (Viner 125). The concept of comparative advantage has merit in many areas in the sense that it assists the country to earn foreign currency. The foreign earnings a re good since they can be used to finance various social and infrastructural programs in Spain. The foreign earnings are