ch 9 terms Flashcards
define comparative advantage
all countries benefit from trading with each other. allows specialization
define globalization
country operates and trades on international level
autarky
country doesn’t trade
what makes up total trade
imports + exports
countries with small economy:
price takers or makers?
price takers
country with big economy:
price taker or maker?
price maker
what are exports
stuff shipped out
difference between higher supply and lower demand at world price
who benefits from exports
domestic sellers
world price high: import or export?
export for more profit
world price low: import or export?
import for cheaper
what are imports
stuff we ship in
difference between higher demand and lower supply
who benefits from imports
domestic consumers
who is worse off from imports
domestic sellers
who is worse off from exports
domestic buyers
define pareto improvement
someone benefits and no one else is worse off
define kaldor-hicks improvement
theoretically everyone is better off
ex. winners compensate losers
define tariff
tax on imported goods that drive up prices
incentivize buying local
what do tariffs cause
tax rev rises
deadweight loss
define quota
limit on imported goods #
what does quota cause
imported prices rise long term
no tax rev unless licenses sold
other benefits of international trade
variety of goods
low cost through economy of scale and competition
flow of ideas and innovation
hurt domestic jobs argument counter
displaced workers will move on to stronger industries
national security argument counter
often exaggerated
we can stockpile at lower cost
unfair competition argument counter
domestic consumer benefit is greater than domestic producer loss
define infant industry protection
protect infant industry from imports until it can compete
however often never grows up
define unfair competition argument
if other country subsidizes its industry how can we compete? it’s not fair
define multilateral approach to free trade
i cut tariff on X, you cut tariff on Y
define unilateral approach to free trade
i put tariff on X
