international trade

Question 1

import def

Answer 1

goods and services purchased from other countries

Question 2

export def

Answer 2

goods and services sold to other countries

Question 3

autarky def

Answer 3

when a country tries to become self-sufficient and does not trade with foreign countries

Question 4

globalization def

Answer 4

the growing economic links between different countries

Question 5

benefits of trade

Answer 5

• lower price
• more choices for consumers
• access to unavailable resources
• economies of scale
• higher competition
• foreign currency

Question 6

List the theories of international trade

Answer 6

• Absolute advantage theory Adam Smith 1776

- Comparative advantage theory David Ricardo 1817

Question 7

the comparative advantage theory

Answer 7

• specialize in one good
• increase productivity of a country
• allows greater total output

the ability to produce at a lower opportunity cost than another country

Question 8

sources of comparative advantage theory

Answer 8

• different climate
• different technology = greater experience + innovation
• Factor endowments (possession)

Question 9

absolute advantage theory

Answer 9

• no reasons to trade
• use of protectionism: tariffs, quotas and subsidies

the ability to produce more efficiently than another country

Question 10

protectionism def

Answer 10

the restriction of international free trade by governments.

Measures include quotas, tariffs, embargoes and import duties.

Question 11

tariffs def

Answer 11

A government tax or duty applied to a price of an import as it comes into a country.

Question 12

quotas def

Answer 12

Is a physical limit imposed on the amount of goods which may be imported, expressed as the number of cars, beef

Question 13

other forms of protection

Answer 13

• voluntary export restraints (VERs)
• administrative obstacle
• anti-dumping

Question 14

the WTO

Answer 14

World Trade Organization

Question 15

arguments for protectionism

Answer 15

• domestic employment
• infant industries
• prevent dumping
• standarts
• protect strategic industries
• raise revenue

Question 16

arguments against protectionism

Answer 16

• misallocation of resources
• trade war
• higher priced import
• reduce competitiveness

Question 17

anti-dumping measures

Answer 17

measures are imposed by governments against exports of goods and services, which are sold into their country below the cost of production.

Question 18

dumping def

Answer 18

when the price of a country’s exports is below the true costs of
production.

Question 19

administrative obstacles def

Answer 19

Bureaucracy. VERs, voluntary export restraints, through pressuring country

Question 20

voluntary export restraints def

Answer 20

imposed restriction by an exporting country on the volume of its exports.

Question 21

protective subsidies def

Answer 21

Subsidies given to protect infant industries/domestic producers

Question 22

specialization def

Answer 22

method of production where a business or area focuses on the production

Question 23

factor intensive goods def

Answer 23

producing a good that requires a lot of one resource

Question 24

factor endowment def

Answer 24

the amount of land, labor, capital or entrepreneurship that a country possesses and can use for manufacturing

Question 25

trade def

Answer 25

buying and selling goods and services

Question 26

free trade def

Answer 26

international trade without any regulations such as quotas, tariffs, or other restrictions