Chapter 7

Question 1

Comparative Advantage

Answer 1

States gain by specializing in producing and exporting what they produce most efficiently

Question 2

Absolute Advantage

Answer 2

the ability of a country or firm to produce more of a certain good or service than other countries or firms using the same amount of effort and resources

Question 3

Heckscher-Ohlin

Answer 3

factors which a country is endowed with used to the full extent

• Land
• Labor
• Capital
• Human Capital

Question 4

Protectionism

Answer 4

the imposition of barriers to restrict imports to shield domestic producers

Question 5

Trade Barriers

Answer 5

Government limitations on the international exchange of goods

Question 6

Tariffs

Answer 6

tax on imports levied at the border and paid by importer

Question 7

Quota

Answer 7

limits the quantity of a foreign good that can be sold domestically

Question 8

Nontariff

Answer 8

regulations targeted at foreign goods

Question 9

reciprocity

Answer 9

in international trade relations a mutual agreement to lower tariffs and other barriers to trade

Question 10

Most favored nation (MFN) status

Answer 10

giving certain nations better deals, by giving them a lower rate compared to a third party

Question 11

World Trade Organization (WTO)

Answer 11

An institution created in 1995 to succeed the GATT and govern international trade relations. WTO the multilateral reduction of barriers to trade, and oversees resolutions to trade disputes

Question 12

General Agreement on Tariffs and Trade

Answer 12

An international institution created in 1947 in which members countries committed to reduce barriers to trade and provide similar trading conditions to all other members

Question 13

Regional trade agreements (RTA’s)

Answer 13

Agreements among three or more countries in a region to reduce barriers to trade among themselves