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Summary20 - advantage and exchanging goods through trade 3...

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CHAPTER 20 SUMMARY: 1. Does the United States have a trade surplus or trade deficit with other countries? The United States runs trade surpluses with some countries, but trade deficits with more countries. Overall, the United States imports more goods and services than it exports. In other words, it runs an overall trade deficit. The trade deficit has gotten large in recent years and appears to be getting larger. 2. If a country is better at producing something than another country, shouldn't it produce it? If a country is better at producing a product than another country, it is said to have an absolute advantage in producing the good. However, trade is based on comparative, not absolute, advantage. A country has a comparative advantage in producing something if it has a lower opportunity cost of producing it. Countries will be better off by specializing in their comparative
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Unformatted text preview: advantage and exchanging goods through trade. 3. What gives a country a comparative advantage in something? The main reason for differences in comparative advantage across countries is differences in factor endowments, such as population, natural resources, amount of human and physical capital, and other factors. In addition, specialized education, training, and investment can lead to an acquired comparative advantage. 4. What kinds of trade barriers are used to restrict trade? Tariffs, quotas, voluntary export restrictions, and export subsidies are the main tools of trade restriction. 5. Isn't it good to protect ourselves from foreign competition? Trade restrictions almost always lead to a net loss for an economy. They result in higher prices for both foreign and domestic goods and lower overall employment....
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