CH. 20 International Trade Vocabulary

Flashcards for International Trade Lecture Review

Absolute advantage

When one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country.

Comparative advantage

When a country can produce a good at a lower cost in terms of other goods or a lower opportunity cost.

Gain from trade

A country that can consume more than it can produce as a result of specialization and trade.

Intra-industry trade

International trade of goods within the same industry.

Value chain

How a good is produced in stages.

Economies of scale

Lower average production costs that come from producing at a larger scale.

Tariffs

Taxes that governments place on imported goods.

World Trade Organization (WTO)

Committed to lowering barriers to trade.

Splitting up the value chain

Many of the different stages of producing a good happen in different geographic locations.