6. Comparative Advantage and the Gains from International Trade

6. Comparative Advantage and the Gains from International Trade

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Comparative Advantage and the Gains from International Trade - Tariff – a tax imposed by a government on imports - Imports – Goods and Services bought domestically but produced in other countries - Export- Goods and services produced domestically buy sold in other countries - Comparative Advantage – the ability of an individual, a firm, or a county to produce a good or service at lower opportunity cost that competitors - Opportunity Cost – The highest valued alternative that must be given up to engage in an activity - Absolute Advantage – the ability to produce more of a good or service than competitors when using the same amount of resources - Autarky – a situation in which a country does not trade with other countries - Terms of trade- the ratio at which a country can trade its exports for imports from other countries - Among the main sources of comparative advantage are the following 1. Climate and Natural Resource – this source of comparative is most obvious 2. Relative abundance of labor and capital – some countries, such as the United
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6. Comparative Advantage and the Gains from International Trade

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