exam 6 Flashcards
Comparative Advantage
The ability to make something at a lower opportunity cost than other producers face.
Absolute Advantage
The ability to make something using fewer resources than other producers use.
Tariffs
A tax on imports.
Import Quotas
A legal amount on the amount of a commodity that can be imported.
Bilateral Agreement
Trade agreement between two countries.
Multilateral Agreement
Trade agreement among more than two countries.
Dumping
Selling a product abroad for less than charged in the home market or for less than the cost of production.
U.S. Exports Composition
(Most) Services- 34%
Capital goods- 24%
Industrial supplies- 18%
Consumer goods- 9%
Autos- 7%
Food- 6%
(Least) Other- 3%
U.S. Imports Composition
(Most) Consumer goods- 22%
(Most) Capital goods- 22%
Services- 19%
Industrial supplies- 16%
Autos- 13%
Food- 5%
(Least) Other- 3%
U.S. Trading Partners (Exports)
(Most important) Canada
Mexico
China
Japan
The United Kingdom
Germany
South Korea
The Netherlands
France
(Least important) Brazil
U.S Trading Partners (Imports)
(Most important) China
Canada
Mexico
Japan
Germany
South Korea
The United Kingdom
France
India
(Least important) Ireland
Differences In Resource Endowments
A reason for International Specialization. It often creates differences in the opportunity cost of production across countries.
Economies Of Scale
A reason for International Specialization. These are forces that reduce a firm’s average cost as the scale of operation expands in the long run.
Differences In Tastes
A reason for International Specialization. This is the differences of usage and consumption patterns along different countries.
More Variety
The last reason for International Specialization. This allows for people to have choices within the market.
U.S. Consumption Percentages
(Most) Cotton- 505%
Wheat- 160%
Oil Seeds- 160%
Coal- 110%
Coarse Grains- 105%
Natural Gas- 90%
Zinc- 82%
Sugar- 79%
Cooper- 65%
Crude Oil- 55%
Aluminum- 42%
(Least)Coffee- 3%
GATT (General Agreement on Tariffs and Trade)
An international trade treaty adopted in 1947 by 23 countries, including the United States. Each member agreed to reduce tariffs through multinational negotiations, reduce import quotas, and treat all members equally with respect to trade.
World Trade Organization (WTO)
The legal and institutional foundation of the multilateral trading system that succeeded GATT in 1995.
The Arguments For Trade Restrictions
National Defense Argument
Infant Industry Argument
Antidumping Argument
Jobs and Income Argument
Declining Industries Argument
Industrial Market Countries
Economically advanced capitalist countries also known as developed countries and high-income economics.
Developing Countries
Low-income and middle-income economies; most are known as emerging market economies. They have higher rates of illiteracy, higher unemployment, faster population growth, and their exports mostly consist of agricultural products and raw materials. Challenges they face are poor health (a result of malnutrition and disease), high infant mortality rate, high birth rates, and low incomes.
High-Income Economies(Developed Countries)
Examples of these are the United States($58,030)(Infant Mortality rate; 5.6)(Birth rate; 1.8), Germany($49,5300)(Infant Mortality rate; 3.1)(Birth rate;1.5), Japan($42,870)(Infant Mortality rate; 2.0)(Birth rate;1.5), and the United Kingdom($42,100)(Infant Mortality rate; 3.5)(Birth rate;1.8). They have a 16% share of the world population. They also have a 64% share of the world’s output.
Middle-Income Economies(Developing Countries)
Examples of these are Mexico($17,740)(Infant Mortality rate; 11.3)(Birth rate; 2.2), China($15,500)(Infant Mortality rate; 9.2)(Birth rate; 1.6), Brazil($14,810)(Infant Mortality rate; 14.6) (Birth rate; 1.8), and India($6,490)(Infant Mortality rate; 37.9)(Birth rate; 2.4). They have a 75% share of the world population. They also have a 35% share of the world’s output.
Low-Income Economies(Developing Countries)
Examples of these are Bangladesh($3,790)(Infant Mortality rate; 30.7)(Birth rate; 2.1), Kenya($3,130)(Infant Mortality rate; 35.5)(Birth rate; 4.3), Ethiopia($1,730)(Infant Mortality rate; 41.4)(Birth rate; 4.3), and Congo($730)(Infant Mortality rate; 74.5)(Birth rate; 5.9) . They have a 9% share of the world’s population. They also have a 1% share of the world’s output.
