Micro
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| Imports | goods and services purchased from other countries
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| Exports | goods and services sold to other countries
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| Autarky | situation in which a country cannot or does not trade with other countries
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| Globalization | phenomenon of growing economic linkages among countries
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| Comparative Advantage | country produces a good/service if the opportunity cost of producing the food or service is lower for that country than for other countries
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| Ricardian model of international trade | analyzes international trade under the assumption that opportunity costs are constant (PPF's are linear)
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| Main sources of comparative advantage | 1. Differences in tech- able to produce a good at lower cost
2. International differences in climate
3. Differences in factor endowments
4.Increasing returns to scale
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| Heckscher-Ohlin model | comparative advantage is derived from factor endowments (labor&capital) that are relatively abundant in that country
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| Factor intensity | -measure of which factors is used relatively greater quantities than other factors in production
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| Increasing Returns to Scale | if output can be increased using a less than proportional increase in the factors of production -factor productivity increases as output increases-can give rise to monopoly-can give rise to international trade
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| Domestic Demand Curve | shows how the quantity of a good demanded by domestic consumers depends on the price of that good
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| Domestic Supply Curve | shows how the quantity of a good supplied by domestic producers depends on the price of that good
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| World Price | price at which that good can be bought or sold abroad
-if wp is lower than the autarky price, trade leads to imports and a fall in domestic price compared to wp
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| Consumer Surplus | net economic value consumers get from consuming a good or service
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| Producer Surplus | net economic value of producing a good or service
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| Imports ________ consumer surplus, but __________ producer surplus | increase, decrease
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| Exports ________ consumer surplus, but _________ producer surplus | decrease, increase
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| If ______ is higher than the autarky price, trade leads to exports and a rise in the domestic price compared with the wp | world price
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| Free Trade | when government does not attempt either to reduce or to increase the levels of exports and imports that occur naturally as a result of supply and demand
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| trade protection | policies that limit imports
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| Tariff | tax on imports
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| Import quota | legal limit on the quantity of a good that can be imported
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| Advocate of tariffs and import quotas offer a variety of arguments. 3 common ones are: | 1. national security
2. job creation
3. the infant industry argument
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| International trade agreements | treaties in which a country promises to engage in less trade protection against the exports of other countries in return for a promise by other countries to do the same for its own exports-NAFTA
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| World Trade Organization | multinational organization as well as adjudicate trade disputes between member countries
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| European UNion | customs union amonf 27 European nations
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| Offshore Outsourcing | takes place when businesses hire people in another country to perform various tasks
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