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Unit 7 International Trade Chapter 40 (Cross-border Trade (Case for…
Unit 7 International Trade Chapter 40
Output and Pricing
Comparative advantage
Opportunity Cost ratio
Slope of curve
Vegetables sacrificed per ton beef
Self-sufficiency output mix
Specialization and trade
Produce with lowest domestic opportunity cost
Assumptions
Two nations
Same size labor force
Constant costs in each country
Different costs between countries
U.S. absolute advantage in both
Gains from Trade
Improved options
Complete specialization
Slope = Terms of trade
More of both goods
Trading possibilities line
More efficient resources allocation
Economic basis for trade
Land-intensive goods
Capital-intensive goods
Labor-intensive goods
Trade profile
Trade deficit in goods
Trade surplus in goods
Supply and Demand analysis
Domestic price with no trade
World price >Domestic price
Export surplus
Export supply curve
World Price
World price< Domestic price
Import shortage
Import supply curve
Cross-border Trade
Economic impact of Tariffs
Direct effects
Increase in domestic production
Decline in imports
Decline in consumption
Tariff revenue
Indirect effects
Economic impact of Quotas
Increase in domestic production
Decline in imports
Decline in consumption
Quotas do not provide for any government revenue but instead transfer it to foreign producers
Import Quota
Voluntary export Restriction (VER)
Export subsidy
Non Tariff Barrier (NTB)
Case for protection
Diversification for stability
Infant industry
Military self-sufficiency
Protection against dumping
Increased domestic employment
Trade barriers and export subsidies
Revenue Tariffs
Protective Tariffs
Offshoring and Trade adjustment assistance
Trade adjustment assistance act
Offshoring of jobs
Multilateral Trade Agreements
World trade organisation (WTO)
European Union (EU)
General agreement on tariffs and trade (GATT)
North American Free Trade Agreement (NAFTA)
Imports exceeds exports
Exports exceeds imports
Designed to help individuals hurt by international trade
Shifting of work previously done by American workers to workers aboard