International Trade: Why We Trade, and Trade Policy

Flashcards covering key vocabulary and concepts from the lecture on international trade and trade policy.

Comparative Advantage

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

Tariff

A tax on imports that makes imported goods more expensive.

Quota

A legal limit on the quantity of a good that can be imported.

Red Tape

Non-tariff barriers such as paperwork, inspections, and delays that complicate trade.

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 accept for a good and the actual price they receive.

Deadweight Loss

A loss of economic efficiency when the equilibrium outcome is not achievable or not achieved.

Imports

Goods brought into a country from abroad for sale.

Exports

Goods sent out of a country for sale in another country.

Trade Costs

All costs associated with making a trade, including shipping, customs, and compliance costs.

Infant Industry Argument

The belief that new industries should be protected until they become established and can compete.

National Security Argument

The rationale for protecting domestic industries that are deemed critical for national security.

Anti-dumping

The practice of foreign producers selling goods at a price lower than their cost to eliminate competition.

Globalization

The process by which businesses develop international influence or start operating on an international scale.

Specialization

The process of focusing on a specific subset of tasks to improve efficiency.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Quota Rents

Extra profit that accrues to those who hold the licenses to import under a quota.