Microeconomics Chapter 9

A collection of vocabulary flashcards focused on key concepts from the chapter on international trade.

Equilibrium without trade

Only domestic buyers and sellers with equilibrium price and quantity determined on the domestic market.

Consumer surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer surplus

The difference between what producers are willing to sell for and the actual selling price.

World price (PW)

The price that prevails in the world market for a good.

Domestic price (PD)

The price of a good within a country when there is no trade.

Comparative advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Exports

Goods produced domestically and sold to foreign markets.

Imports

Goods produced in foreign markets and purchased domestically.

Small economy assumption

A small economy takes prices as given and does not affect world prices.

Gains from trade

The increased total surplus that results from engaging in trade.

Tariff

A tax on goods produced abroad and sold domestically.

Deadweight loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Import quota

A quantitative limit on the number of goods that can be imported.

Free trade

The absence of barriers to trade between countries.

Jobs argument

The belief that trade with other countries destroys domestic jobs.

National-security argument

The rationale that certain industries are vital to a nation’s security.

Infant-industry argument

The notion that new industries need protection from foreign competition until they become established.

Unfair-competition argument

The idea that free trade is only acceptable if all countries adhere to the same standards.

Protection-as-a-bargaining-chip argument

The use of trade restrictions to gain concessions from trade partners.

Welfare analysis

An assessment of the changes in well-being that occur from trade.

Price ceiling

A maximum price that can be charged for goods in a market.

Price floor

A minimum price that must be paid for goods in a market.

Total surplus

The overall economic welfare measuring consumer surplus plus producer surplus.

Domestic consumers

Individuals in a country who buy goods and services.

Domestic producers

Individuals or businesses that make goods and services within a country.

Market competition

The degree of rivalry between firms in a market.

Economies of scale

Cost advantages reaped by companies when production becomes more efficient.

Invisible hand

The self-regulating nature of the marketplace.

Tariff revenue

The income generated from tariffs imposed on imported goods.

Supply and demand

The relationship between the quantity of a good that producers are willing to sell and the quantity that consumers are willing to buy.

Quantitative restrictions

Limits placed on the quantity of goods that can be imported.

Trade barriers

Government-imposed restrictions on international trade.

Optimal trade policy

The strategy that maximizes the overall benefits of trade.

Consumer welfare

The benefit that consumers gain from purchasing goods at lower prices.

Producer welfare

The benefit that producers gain from selling goods at higher prices.

Trade benefits

The positive effects and advantages gained from international trade.

Trade harms

The negative impacts on certain sectors or individuals from engaging in trade.

Policy implications

The potential effects or consequences of certain governance or economic policies.

International agreements

Treaties or compacts that govern trade relations between countries.

Market access

The ability to sell goods in a foreign market.

Export surplus

A situation where a country’s value of exports exceeds its imports.

Import dependency

A reliance on foreign goods to meet domestic demand.

Balance of trade

The difference between the value of a country's exports and imports.