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Chapter 7: Comparative advantage and the Gains from International Trade -…
Chapter 7:
Comparative advantage and the Gains from International Trade
Absolute Advantage
ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
Autarky
a situation in which a country does not trade with other countries
Comparative Advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
Dumping
selling a product for a price below its cost of production
Exports
Goods and services produced domestically but sold in other
countries
External Economies
are reductions in a firm’s costs that result from an
increase in the size of an industry
Free Trade
Trade between countries that is without government restrictions
Globalization
process of countries becoming more open to foreign trade
and investment
Imports
Goods and services bought domestically but produced in other
countries
Oppurtunity Cost
hhighest-valued alternative that must be given up to engage in an activity
Protectionism
The use of trade barriers to shield domestic firms from
foreign competition
Quota
Numerical limits
imposed upon
Tariff
taxes imposed by a government on imports
Terms of Trade
ratio at which a country can trade its exports for imports from another country
Voluntary Export Restraint (VER)
countries on the
quantity of a good imported by one country from another country
World Trade Organization (WTO)
An international organization
that oversees international trade agreements