micro Ch 8: Trade

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

Comparative, comparative

The association formed to lower trade barriers and encourage trade between Canada, the United States and Mexico is known as:

NAFTA

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

Which of the following arguments is used to justify protectionism?

Tariffs and quotas protect infant industries

Which of the following is a drawback to the infant industry justification for protectionism?

The industries under protection may never become efficient enough to compete with foreign firms.

Which of the following is a source of comparative advantage?

The relative abundance of capital and labor

The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources is known as:

absolute advantage

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

A product produced in a foreign country and purchased by residents of the home country is called:

an import

Goods and services produced domestically but sold to other countries are called __________.

exports

The opponents of globalization contend that:

globalization destroys cultures

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

The use of trade barriers to shield domestic companies from foreign competition is called __________.

protectionism

A numerical limit on the quantity of a good that can be imported is known as a(n):

quota

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _ the payoff to devoting additional resources to that activity.

smaller