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International Economics (Subject) / International Trade due to comparative advantage (Lesson)
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- comparitve advantage (2) a producer who has smaller opportunity costs of producing a good has a comparative advantage a low domestic price indicates that the country has a comparative advantage
- welfare effects of free trade When a country allows trade and becomes an exporter, producers of the good are better off, consumers of the goods are worse off
- tariffs (2) tariff reduces the quantity of imports and moves the domestic market closer to its equilibrium without trade with a tariff, total surplus in the market decreases by an amount referred to as a deadweight loss
- reasons for trade restriction protecting jobs defending national security helping infant industry preventing unfair competition
- if a a country has a comparative advantage... the domestic price will be below the equilibrium
- an import quota is... a limit of the quantity of goods that can be produced abroad and sold domestically
- due to quota domestic buyers are worse off, domestic sellers are better off
- with quota total surplus of the market.. decreases
- reasons for restricting trade (5): Jobs National Security Infant Industry Unfair Competition Protection as Bargaining Chip
- comparative advantage: producer with smaller opportunity costs has a comparative advantage a low domesitc price indicates that the country has a comparative advantage
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- welfare effects when a country allows trade, producers are better off and consumers are worse off
- welfare effects of trade restricion a tariff reduces the quantity of imports and moves the domestic market closer to its equilibrium with a tariff, total surplus decreases (called deadweight loss)