International Trade

Flashcards covering key concepts and terms related to International Trade and Comparative Advantage.

Comparative Advantage

The ability to produce a good or service at a lower relative opportunity cost than that of another producer.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Terms of Trade

The ratio at which one good can be exchanged for another, determining the benefits of trade for both parties.

Specialization

The process whereby individuals or firms concentrate on a particular area of production to gain efficiency.

Welfare Effects

The impact of trade on the economic well-being of consumers and producers, indicated by changes in surplus.

Tariff

A tax or fee imposed on imported goods to restrict trade.

Quota

A numerical limit on the amount of a good that can be imported.

Small-Country Model

An economic model where a country is a price taker and cannot influence world prices.

Gains from Trade

The increase in utility or profit that comes from trading rather than producing all goods independently.

Deadweight Loss

The loss of economic efficiency that occurs when equilibrium for a good or service is not achieved or is not achievable.

Consumer Surplus

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

Producer Surplus

The difference between what producers are willing to accept for a good and what they actually receive.