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After reading Chapter 33, you should be able to:
Worldwide Importance of International Trade
- Define comparative advantage. How important is international trade in the U.S.? in other countries?
Comparative Advantage and Mutual Gains from Exchange
- Given production figures for two goods from two countries, be able to calculate opportunity cost and recognize a mutually beneficial exchange rate.
- Be able to determine comparative advantage and the direction of trade.
- Understand how comparative advantage leads to specialization and what the gains from trade are.
Relationship Between Imports and Exports
International Competitiveness
- How do we really pay for imports? Is the U.S. losing competitiveness in world trade?
Arguments Against Free Trade
- Explain the reasoning behind the infant industry and foreign subsidies arguments for protectionism, as well as the weaknesses of these arguments.
- Explain the reasoning behind the dumping, protecting domestic jobs, environment and national security arguments for protectionism, as well as the weaknesses of these arguments.
Ways to Restrict Foreign Trade
- Define: quota, VRAs, VIEs and understand how they change international trade and domestic markets.
- How do tariffs and quotas compare? Who specifically gains or loses from them?
International Trade Organizations
- Be familiar with the history and activities of GATT, WTO and regional trade agreements. and how have they influenced international trade? What are trade diversion and trade deflection?
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