05- International Trade

Question 1

Balance of trade

Answer 1

aggregation of importing and exporting that leads to a trade surplus or deficit

Question 2

Export

Answer 2

selling abroad

Question 3

Import

Answer 3

buying from abroad

Question 4

Merchandise

Answer 4

tangible goods that can be traded

Question 5

Services

Answer 5

intangible goods that can be traded

Question 6

Trade deficit

Answer 6

econ condition where a nation imports more than it exports

Question 7

Trade surplus

Answer 7

econ condition where a nation exports more than it imports

Question 8

Absolute advantage

Answer 8

econ condition where one nation is superior to other nations

Question 9

3 classical trade theories

Answer 9

mercantilism, absolute advantage, comparative advantage

Question 10

comparative advantage

Answer 10

relative advantage in one economic activity

Question 11

4 parts of Diamond theory

Answer 11

Factor conditions, demand conditions, strategy/structure/rivalry, related and supporting industries - national comp advantage

Question 12

Factor endowement

Answer 12

extent to which countries possess various factors of production, labor, land, and tech

Question 13

Factor endowment theory

Answer 13

Nations will develop their comparative advantage through their local abundences

Question 14

First mover advantage

Answer 14

firms entering a market first

Question 15

free trade

Answer 15

little to no government intervention

Question 16

modern trade theories

Answer 16

product life cycle, strategic trade, national competitive advantage

Question 17

opportunity cost

Answer 17

cost of pursuing one activity at the expense of another

Question 18

PLC theory

Answer 18

accounts for changes in patterns of trade over time by focusing on product life cycle

Question 19

protectionism

Answer 19

governments should protect domestic industries promoting exports

Question 20

resource mobility

Answer 20

assumption that a resource used in production can be placed in another industry

Question 21

Strategic trade policy

Answer 21

provides companies a strategic advantage in international trade through subsidies and other suppoorts

Question 22

Strategic trade theory

Answer 22

suggests that governments in certain industries can enhance their odds of international success

Question 23

Theory of absolute advantage

Answer 23

theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage.

Question 24

Theory of comparative advantage

Answer 24

is a theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.

Question 25

Theory of mercantilism

Answer 25

theory that suggests that the wealth of the world is fixed and that a nation that exports more and imports less will be richer.

Question 26

Theory of national competitive advantage of industries

Answer 26

a theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a “diamond.” Also known as the diamond theory.

Question 27

NTB consequences

Answer 27

whole nation is worse off while certain special interest groups (such as certain industries, firms, and regions) benefit.

Question 28

2 Arguments against free trade

Answer 28

1. protectionism 2. infant industries

Question 29

4 Arguments for free trade

Answer 29

1. national security 2. consumer protection 3. foreign policy 4. environmental and social responsibility

Question 30

administrative policy

Answer 30

rules that make it harder to import foreign goods

Question 31

Antidumping duty

Answer 31

tariff levied on imports that have been "dumped" - selling bellow costs to unfairly drive out domestic firms out of business

Question 32

Deadweight cost

Answer 32

net losses that happen as a result of tariffs

Question 32

import quota

Answer 32

restrictions on the quantity of imports

Question 33

import tariff

Answer 33

tax imposed on imports

Question 34

infant industry argument

Answer 34

small domestic firms need government support otherwise will be swallowed up by mature foreign firms

Question 35

Local content requirement

Answer 35

is a requirement stipulating that a certain proportion of value of the goods made in one country must originate from that country

Question 36

NTB

Answer 36

relies of nontariffs means to discourage imports

Question 37

subsidy

Answer 37

government payments to domestic firms

Question 38

Tariff barrier

Answer 38

Discourages imports

Question 39

Trade embargo

Answer 39

political motivated trade sanction against foreign countries to signal displeasure

Question 40

Voluntary export restraint

Answer 40

international agreement that shows that exporting countries voluntarily agree to restrict their exports