Specialisation and Trade Flashcards
1
Q
What is absolute advantage
A
when a country can produce more of a product than another country
2
Q
What is comparative advantage
A
when a country can produce at a lower opportunity cost then another country
3
Q
What is the law of comparative advantages
A
Even if a country has an absolute advantage in the production of all goods, It can benefit from specialisation and trade if it specialises in the production of goods in which it has a can have comparative advantage
4
Q
What is the formula for opportunity cost
A
what is being given up
———–(over)
What is being gained
5
Q
Benefits of international trade
A
Living Standards Access to resources and variety of goods/services Specialisation Efficiency Lower prices
6
Q
Cost of international trade
A
Structural unemployment Over specialisation and dependents Vulnerability to external shocks Dangers of dumping Unbalanced development Global monopolies Negative externalities
