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15.8: Key Terms

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    Autarky denotes the no-trade situation.

    Principle of comparative advantage states that even if one country has an absolute advantage in producing both goods, gains to specialization and trade still materialize, provided the opportunity cost of producing the goods differs between economies.

    Terms of trade define the rate at which goods trade internationally.

    Consumption possibility frontier defines what an economy can consume after production specialization and trade.

    Intra-industry trade is two-way international trade in products produced within the same industry.

    Intra-firm trade is two-way trade in international products produced within the same firm.

    Supply chain: denotes the numerous sources for intermediate goods used in producing a final product.

    Intermediate good: one that is used in the production of final output.

    Content requirement: requires that a specified percentage of the final value of a product originate in the producing economy.

    Dynamic gains: the potential for domestic producers to increase productivity by competing with, and learning from, foreign producers.

    Total factor productivity: how efficiently the factors of production are combined.

    Tariff is a tax on an imported product that is designed to limit trade in addition to generating tax revenue. It is a barrier to trade.

    Quota is a quantitative limit on an imported product.

    Trade subsidy to a domestic manufacturer reduces the domestic cost and limits imports.

    Non-tariff barriers, such as product content requirements, limits the gains from trade.

    Dumping is a predatory practice, based on artificial costs aimed at driving out domestic producers.

    This page titled 15.8: Key Terms is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.