International Trade and Public Policy

Comparative advantage

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

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 versus the actual price they receive.

Import

A good brought into a country from abroad for sale.

Export

A good sent out of a country for sale in another country.

Tariff

A tax placed on imported or exported goods.

Quota rent

The difference between the demand price and the supply price related to a quota.

Deadweight loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achieved.

Total surplus

The sum of consumer surplus and producer surplus, reflecting the total benefit to society from trade.

Impact of imports

Occurs when the world price is lower than the domestic price, leading to increased consumer surplus and decreased producer surplus.

Impact of exports

Occurs when the world price is higher than the domestic price, leading to increased producer surplus and decreased consumer surplus.