ch 9 terms

Question 1

define comparative advantage

Answer 1

all countries benefit from trading with each other. allows specialization

Question 2

define globalization

Answer 2

country operates and trades on international level

Question 3

autarky

Answer 3

country doesn’t trade

Question 4

what makes up total trade

Answer 4

imports + exports

Question 5

countries with small economy:
price takers or makers?

Answer 5

price takers

Question 6

country with big economy:
price taker or maker?

Answer 6

price maker

Question 7

what are exports

Answer 7

stuff shipped out
difference between higher supply and lower demand at world price

Question 8

who benefits from exports

Answer 8

domestic sellers

Question 9

world price high: import or export?

Answer 9

export for more profit

Question 10

world price low: import or export?

Answer 10

import for cheaper

Question 11

what are imports

Answer 11

stuff we ship in
difference between higher demand and lower supply

Question 12

who benefits from imports

Answer 12

domestic consumers

Question 13

who is worse off from imports

Answer 13

domestic sellers

Question 14

who is worse off from exports

Answer 14

domestic buyers

Question 15

define pareto improvement

Answer 15

someone benefits and no one else is worse off

Question 16

define kaldor-hicks improvement

Answer 16

theoretically everyone is better off
ex. winners compensate losers

Question 17

define tariff

Answer 17

tax on imported goods that drive up prices
incentivize buying local

Question 18

what do tariffs cause

Answer 18

tax rev rises
deadweight loss

Question 19

define quota

Answer 19

limit on imported goods #

Question 20

what does quota cause

Answer 20

imported prices rise long term
no tax rev unless licenses sold

Question 21

other benefits of international trade

Answer 21

variety of goods
low cost through economy of scale and competition
flow of ideas and innovation

Question 22

hurt domestic jobs argument counter

Answer 22

displaced workers will move on to stronger industries

Question 23

national security argument counter

Answer 23

often exaggerated
we can stockpile at lower cost

Question 24

unfair competition argument counter

Answer 24

domestic consumer benefit is greater than domestic producer loss

Question 25

define infant industry protection

Answer 25

protect infant industry from imports until it can compete
however often never grows up

Question 26

define unfair competition argument

Answer 26

if other country subsidizes its industry how can we compete? it’s not fair

Question 27

define multilateral approach to free trade

Answer 27

i cut tariff on X, you cut tariff on Y

Question 28

define unilateral approach to free trade

Answer 28

i put tariff on X