Opportunity Cost |
Highest-valued alternative that must be given up to engage in an activity |
Comparative Advantage |
Situation of producing at lowest opportunity cost |
Specialization |
Focusing production on highest Comparative Advantage |
Absolute Advantage |
Situation of being able to produce higher amounts than anyone else, given same resources |
Autarky |
Situation in which a country doesn't trade with other countries |
Terms Of Trade |
Ratio of exports for imports in trade |
Free Trade |
Trading between countries without gov't restrictions |
Quota |
Numerical limit gov't imposes on quantity of good that can be imported |
Voluntary Export Restraint (VER) |
Agreement negotiated between 2 countries placing a limit on a quantity imported by a specific country |
General Agreement on Tariffs and Trade(GATT) |
Countries agreed to reduce tariffs from very high levels of the 30's. |
World trade organization |
int'l organization that oversees international trade agreements |
Globalization |
Process of countries becoming more open to foreign trade and investment |
Anti-Globalization |
Think distinctive cultures are crushed, unfair payment to poorer countries, and large corporations leave |
Protectionism |
Using trade barriers to shield domestic firms from foreign competition (Saves jobs, protects high wages, protects infant industries & National Security) |
Sources of Comparative Advantage |
Relative abundance of labor and capital, climate & natural resources, technology, external economies of scale |
Tariff & Quota Effects |
Consumers & Economy Lose, Producers Gain |
Imports = |
Amount of Consumption - Amount of production at a price |
Trade Restrictions |
the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas. |
