Econ-205 Chapter 17 Notes

Econ-205 Chapter 17 Notes - Chapter 17 International trade...

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Chapter 17 International trade and Comparative Advantage Terms Specialization means that a country devotes its energies and resources to only a small proportion of the world’s productive activities. One country is said to have an absolute advantage over another in the production of a particular good if it can produce that good using smaller quantities of resources than can the other country. One country is said to have a comparative advantage over another in the production of a particular good relative to other goods if it produces the good less inefficiently as compared with the other country. Mercantilism is a doctrine that holds that exports are good for a country, whereas imports are harmful. Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition. Dumping means selling goods in a foreign market at lower prices than those charted in the home market. Important Concepts International trade greatly enhances living standards for all parties involved because: Every country lacks some vital resources that it can get only by trading with others. Each country’s climate, labor force, and other endowments make it relatively efficient producer of some good sand an inefficient producer of other goods. Specialization permits larger outputs and can therefore offer economies of large-scale production. Trade is a win-win situation. Both parties must expect to gain from any voluntary exchange. Trade brings about mutual gains by redistributing products so that both parties end up holding
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This note was uploaded on 04/30/2008 for the course ECON 205 taught by Professor Kamrany during the Fall '07 term at USC.

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Econ-205 Chapter 17 Notes - Chapter 17 International trade...

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