International Trade - chapter 17

Policy makers

________ and consumers approach the problem of inconsistent standards in several ways, ranging from explicit laws about imports to voluntary purchasing decisions by consumers.

efficient

The most ________ economic arrangement is one in which each country specializes in the good for which it has a comparative advantage and trades with others.

Domestic consumers

________ lose surplus as a result of buying less at a higher price, and total surplus decreases.

Comparative advantage

________ is the ability to produce a good or service at a lower opportunity cost than others can.

International trade

________ equalizes the supply and demand factors of production across countries.

net exporter

When a country becomes a(n) ________, consumers lose surplus from buying a smaller quantity at a higher price; producers gain surplus.

net importer

When a country moves from autarky to trade, the difference between the world price and the domestic price of a good determines whether the country becomes a(n) ________ or net exporter.

world price

If the ________ is higher than the domestic price, the domestic price will rise when the country opens up to trade.

Autarky

an economy that is self-contained and does not engage in trade with outsiders

Imports

goods and services that are produced in other countries and consumed domestically

Exports

goods and services that are produced domestically and consumed in other countries

Protectionism

a preference for policies that limit trade

trade liberalization

policies and actions that reduce trade restrictions

Tariff

a tax on imported goods which causes inefficiency and deadweight loss

import quota

a limit on the amount of a particular good that can be imported

quota rents

the profits earned by the holders of import rights under a quota

World Trade Organization (WTO)

an international organization designed to monitor and enforce trade agreements, while also promoting free trade

Embargo

a restriction or prohibition of trade in order to put political pressure on a country