Chapter 8

Chapter 8 - Chapter 8: Comparative Advantage and the Gains...

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Chapter 8: Comparative Advantage and the Gains from International Trade International trade benefits U.S. consumers because foreign-made goods have lower prices or higher quality than the U.S.-made goods they have replaced Many U.S. firms that produced these goods have gone out of business, and their workers have had to find other jobs The United States in the International Economy Tariff- a tax imposed by a government on imports Imports- goods and services bought domestically but produced in other countries Exports- goods and services produced domestically but sold in other countries The Importance of Trade to the U.S. Economy GDP is the value of all the goods and services produced in a country during a year Many U.S. manufacturing industries depend on trade Manufacturing jobs depend directly or indirectly on exports U.S. International Trade in a World Context The United States is the largest exporter in the world International trade remains less important to the US than it is to most other countries Comparative Advantage in International Trade People trade for one reason: Trade makes them better off Whenever a buyer and seller agree to a sale, they must both believe they are better off A Brief Review of Comparative Advantage Comparative advantage- the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors Opportunity cost- the highest-valued alternative that must be given up to engage in an
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This note was uploaded on 02/21/2012 for the course EC 101 taught by Professor Idson during the Fall '08 term at BU.

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Chapter 8 - Chapter 8: Comparative Advantage and the Gains...

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