International Economics

TOPIC I: Gains From Trade

OBJECTIVES: 
  1. identify and explain the advantages of free trade.
  2. explain and distinguish between comparative advantage and absolute advantage.
  3. identify countries which possess comparative advantage and the gains from trade from production possibilities data.
  4. identify the major instruments and arguments of protectionism.
  5. analyze the effects of tariffs and import quotas on international markets and domestic markets.

KNOW THE FOLLOWING TERMS

Comparative Advantage 

Trade Possibilities Frontier 

Exports

Imports

Tariff

Terms of trade

KEY CONCEPTUAL QUESTIONS

  1. How can a nation gain from international trade?
  2. How do trade restrictions affect the welfare of nation?
  3. Why do nations erect trade barriers?