Chapter 14.1 Flashcards
Free trade
The absence of government intervention of any kind in international trade so that trade takes place without any restrictions between individuals, firms or governments of different countries
Why do countries benefit from international trade?
Increased competition
Greater efficiency in production
Lower price for consumers
Greater choice for consumers
Acquiring needed resources
Source of foreign exchange
Access to larger markets
Economies of scale in production
Increases in domestic production and consumption as a result of specialization
More efficient allocation of resources
Makes possible the flow of new ideas and technology
Makes countries interdependent, reducing the possibility of hostilities and violence
Serves as an engine for growth
Specialization
When an individual, firm or country concentrates production on one or a few goods and services
When will a country export a good and when will it import?
It will export if its domestic price without trade is lower than the world price and it will import if its domestic price is higher than the world price
