Chapter 6

Question 1

Absolute Advantage

Answer 1

The ability to produce more of a good than another producer.

Question 2

International Trade

Answer 2

The exchange of goods and services by different countries.

Question 3

Law of comparative advantage.

Answer 3

Producers should produce the goods they are most efficient at producing and purchase from others the goods they are less efficient at producing.

Question 4

Exports

Answer 4

Good and services that are sold abroad.

Question 5

Imports

Answer 5

Goods and services purchased abroad.

Question 6

Balance of Trade

Answer 6

Difference between the value of the goods a country exports and the value of the goods it imports.

Question 7

Tariffs

Answer 7

Government-imposed taxes charged on goods and imported into a country. Tax on imports

Question 8

Quota

Answer 8

Establishes the maximum quantity of a product that can be imported or exported during a given period.

Question 9

Embargo

Answer 9

Involves stopping the flow of exports to or imports from a foreign country.

Question 10

Global Economy

Answer 10

Economy in which companies compete actively with businesses from around the world.

Question 11

Free trade area

Answer 11

A region within which trade restrictions are reduced or eliminated.

Question 12

North American Free Trade Agreement

Answer 12

Allows businesses in the US, Mexico, and Canada to sell their products anywhere in North America without facing major trade restrictions.

Question 13

Multinational Corporation

Answer 13

• Presence in 2 or more countries
• Considerable portion of its assets invested in and derives a substantial portion of its sales and profits from international activities
• Opportunities throughout the world
• Worldwide perspective and orientation