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International Trade
Chapter 28
| Question | Answer |
|---|---|
| Absolute advantage | A country has an absolute advantage in the production of a good if it can produce that good more cheaply than other countries. |
| Absolute Advantage (the Low of) | This states that each country should specialise in the production of that good in which it has an absolute advantage. |
| Administrative barriers | These are obstacles that the government places on importers in order to reduce the amount of imports into the country. |
| Comparative Advantage | This states that a country should specialise in the production of those goods at which it is relatively most efficient, and obtain its other requirements through international trade. |
| Dumping | This is defined as the sale of goods on foreign markets at prices below the cost of producing those goods. |
| Embargo | This is a complete ban on the importation of certain goods. |
| Export subsidy | This is any payment or assistance given by the government to domestic producers of goods and services to promote the sale of those goods and services abroad. |
| Open economy | This is an economy that engages in international trade, that is, one that has exports and imports. |
| Quota | This is a physical limit placed by the government on the amount of a good that can be imported. |
| Tariff | This is tax on goods imported into the country. |
| Terms of trade | A country's terms of trade' is the ratio of its export prices to its import prices. It is obtained by using the formula. |
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