Comparative Advantage And The Gains From International Trade

Front 1

Exports

Back 1

Goods and services produced domestically but sold abroad

Front 2

Imports

Back 2

Goods and services produced abroad but consumed domestically

Front 3

Comparative Advantage

Back 3

A nation has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than some other country
-Comparative is based on the opportunity cost of producing a good.

Front 4

Country Specialization

Back 4

When Countries specialize according to their comparative advantage, the world's resources are used more efficiently, enabling greater production of every good.
All nations can achieve greater total consumption of goods and services and a higher standard of living.

Front 5

Terms of Trade

Back 5

The ratio at which a country can trade domestically produced products for foreign produced products.
The quantity of one good that is exchanged for one unit of the other.

Front 6

Resources

Back 6

A country that has relatively large amounts of a particular resource will tend to have a comparative advantage in goods that make heavy use of that resource

Front 7

International Trade

Back 7

International trade makes each country as a whole better off, but not everyone gains. Because of cheap imports from abroad, consumers benefit and producers are harmed

Front 8

Anti-Trade Bias

Back 8

For any particular good or service, the costs from expanded trade are highly concentrated among relatively few parties, while the benefits are widely dispersed. As a result, those harmed by international trade generally have more incentive to mobilize and lobby than those who benefit

Front 9

Tariff

Back 9

A tax on imported goods.
-It reduces the volume of trade and raises the domestic price of an imported good.
-The producers gain and consumers lose.
-The country as a whole loses, because the tariffs decrease the volume of trade and therefore decrease the gains from trade

Front 10

Quota

Back 10

A government decree that limits the imports of a good to a specified maximum physical quantity.
-It reduces imports, raises the domestic prices

Front 11

Difference between quotas and tariffs

Back 11

Both reduce the gains from trade however the tariff increases tax revenue that can fund government programs