Ch 7 International trade

Balance of trade

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

Deficit

When a country's imports exceed its exports, resulting in a negative balance of trade.

Debtor nation

A country that owes more to other nations than it is owed.

Comparative advantage

A situation where a nation can produce a good at a lower opportunity cost than other nations.

Tariff

A tax imposed on imported goods.

Smoot-Hawley Tariff Act of 1930

Legislation that raised import duties to protect American industry.

Consumer surplus

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

Deadweight loss

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

Quota

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

Tariff rate quota

A system that allows a set amount of a good to be imported at a lower tariff rate, with higher rates for amounts exceeding the limit.

Import barriers

Regulations that make it difficult for foreign goods to enter a market.

Export subsidies

Payments made by the government to encourage the production and export of certain goods.

Dumping

Selling goods in a foreign market at a price lower than their cost of production.

Rent seeking

Lobbying for governmental favors to create economic profit.

Consumer advocacy

The act of promoting and protecting consumer interests.

Producer surplus

The difference between what producers are willing to accept and the actual market price.

Protectionism

Economic policy of restraining trade between countries through tariffs, quotas, or other regulations.

Market impacts of tariffs

Higher prices and decreased quantity demanded and supplied.

Practical impacts of quotas

Saved jobs at a high cost per job to consumers.

Health and safety barriers

Regulations intended to protect consumers that may restrict imports.

Voluntary export restraint

An agreement between exporting and importing countries to limit the quantity of goods exported.

Infant industry argument

The rationale for protecting new industries against foreign competition until they become established.

International trade restrictions

Policies that limit trade across international borders.

Cost of protectionism

Higher prices for consumers and potential inefficiencies in the market.

U.S. price of refined sugar (2019)

356 per pound, significantly higher than the world price of 15c per pound.

Economic profit

Profit over and above the normal rate of return that attracts competition into a market.

Market equilibrium

The state where supply equals demand.

Opportunity cost

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

Job market impact of tariffs

Can protect some jobs while raising costs for consumers.

Societal surplus

The total benefit to society from production and consumption of goods.

Economic efficiency

The optimal distribution of resources to produce goods and services.

Banning foods

An example of using health safety regulations as import barriers.

Competitive advantage

The attributes that allow an organization to outperform its competitors.

Policy lobbying

The act of attempting to influence the decisions of government officials.