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study guide 3

study guide 3 - Global Markets in Action Imports goods and...

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Global Markets in Action Imports- goods and services that we buy from other countries Exports- goods and services that we sell to people Comparative advantage- fundamental force that drives international trade o National comparative advantage Winners- surplus increases Losers- surplus decreases Tariffs- tax on a good that is imposed by the importing country when an imported good crosses its international boundary o Provide revenue to government o Enable government to satisfy self interest of people who earn their incomes in the import competing industries o Effects: Rise in prices Decrease in purchases Increase domestic production Decrease in imports Tariff revenue Consumers lose more than producers gain Deadweight loss Import quota- restriction that limits the maximum quantity of a good that may be imported in a given period o Price rises o Quantity bought decreases o Quantity produced increases o Effects: Consumers lose Producers gain Importers gain Deadweight loss Other import barriers o Health, safety, and regulation barriers o Voluntary export restraint- quota allocated to a foreign exporter of a good o Export subsidy- payment by the government to the producer of an exported good Infant-industry argument- necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets o Gains wont spill over to other parts of economy o Better to give a subsidy Dumping- foreign firm sells its export at a lower price than its cost of production For production o Saves jobs o Compete with foreign cheap labor o Penalizes lax environmental standards o Prevents rich countries from exploiting developing countries o Offshore outsourcing International trade restricted
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o Nefit that Tariff revenue o Rent seeking Externalities Externality- cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer Negative externality- imposes a cost Positive externality- provides a benefit Negative production externalities o Congestion Time cost and fuel cost o Pollution and carbon emission Negative consumption externalities o Banning smoking or noisy parties Positive production externalities o Honey farmer places beehives next to an orange growers orchard Honey farmer bc bees collect pollen and nectar from orange blossom
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