Comparative Advantage & Trade Flashcards
It is when a country produces a good or service for a lower opportunity cost than other countries.
Comparative Advantage
In the eighteenth-century, this economist created the theory of comparative advantage. He argued that a country boosts its economic growth the most by focusing on the industry in which it has the most substantial comparative advantage.
David Ricardo
It is where advantage is anything a country does more efficiently than other countries. Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in agriculture, gasoline, and petrochemicals.
Absolute Advantage
It is what a country, business, or individual does that provide a better value to consumers than its competitors. There are three strategies companies use to gain a competitive advantage. First, they could be the low-cost provider. Second, they could offer a better product or service. Third, they could focus on one type of customer.
Competitive Advantage
It is where a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties.
Trade
It refers to the concept of finding out how many of the product is to be traded in exchange for another product that is beneficial to both parties.
Terms of Trade
It is an exchange where you give up one thing for another.
Trade-off
It refers to the most desirable alternative given up when you make a choice.
Opportunity Cost
It is anything a country does more efficiently than other countries. Absolute advantage describes a situation in which an individual, business, or country can produce more of a good or service than any other producer with the same quantity of resources.
Absolute Advantage
This is where an artificial restriction on the trade of goods or services between two or more countries. It is the byproduct of protectionism. e.g. Tariffs, quotas, embargoes, licensing requirements, standards, and subsidies.
Trade Restrictions
This means when a country produces a good or service for a lower opportunity cost than other countries.
Comparative Advantage
This is the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports.
Protectionism
It is what a country, business, or individual does that provide a better value to consumers than its competitors.
Competitive Advantage
How to calculate the per unit Opportunity Cost
Opportunity Cost divided by Gained
