Chapter 8 and 9: Gains from Trade and International Trade Flashcards
Comparative Advantage
the ability to do a task at a lower opportunity compared to the next person; who gives up LESS to complete a task?
Absolute Advantage
the ability to do a task using fewer inputs, describing not who SHOULD do the task, but who is the BEST at the task.
High Prices
incentivises sellers to make more and buyers to purchase less
A Price Aggregates Information
predicting markets like gambing and betting
Internal Markets
markets within companies to buy and sell scarce resources
Opportunity Cost of a Task Formula
time for the task / time required for alternative
Specialization
focusing on the task of which you have a COMPARATIVE advantage, ensuring the lowest opportunity cost
Trade Costs
an extra cost from international trade; only import if foreign price and costs exceed domestic pricing, and only export if foreign price minus costs is greater than domestic price (or when it is expensive)
World Prices
are set internationally, where buyers will never pay more and sellers will never accept less
Imports and the Effects on Domestic Markets
lower domestic prices, raises domestic quantity demanded, and lowers domestic quantity supplied
Exports and the Effects on Domestic Markets
raises domestic prices, lowes domestic quantity demanded, and raises domestic quantity supplied
Abundant Inputs
the idea of taking advantage of what you have to get what you want, depending on your geographical and resource advantages
Specialized Skills
unique skills that lower opporunity cost like movies in America, or cheese in france
Mass Production
benefits are bargaining power and specialization, like tools and robots to speed up efficiency
Tools of Trade
tariffs (acting as barriers to international trade), red tape effects (which block international trade by preventing increase in domestic revenue), and import quotas (which block international trade by limiting imports and revenue)
