Trade Flashcards
What is the characteristics of a free trade area?
Absence of internal tariffs and absence of external tariffs
give an example of a free trade area in North America:
NAFTA (Canada, Mexico, USA)
Give an example of a free trade area in Asia:
Singapore and Hong Kong
What are the characteristics of a customs union?
Absence of internal tariffs and common external tariffs
What are the characteristics of a common market?
Absence of Internal Tariffs
Common external tariffs
Factor Mobility
Give an example of a common market?
The US
What is the scrambled egg doctrine?
Once countries are scrambled, you can’t get your yoke back.
Who is responsible for the scrambled egg doctrine?
Monnett
Which countries are members of BENELUX?
Belgium, Netherlands, Luxembourg (not Turkey or Russia)
Are quotas and tariffs harmful or beneficial:
To local consumers?
To local producers?
Harmful to local consumers (reduces consumer surplus)
Beneficial to local producers (reduces competition)
Name 3 non-tariff barriers to trade:
Quotas, Licenses, Exchange control
What are the welfare effects of trade restrictions (tariffs, quotas, exchange control) on: Prices Quantity Average Costs Excess Profit Consumer Surplus
Price ⬆️ Quantity ⬇️ Average Costs ⬆️ Excess Profits ⬆️ Consumer Surplus ⬇️ (Same as a monopoly)
What is the Law of comparative advantage?
What you do better relative to the others
Who is responsible for the law of comparative advantage?
Riccardo
What is the 2 assumptions of the law of comparative advantage?
Labor theory of value
Nobody is useless
