Lecture 3 Flashcards
(24 cards)
What are Common Markets?
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading block
Define Free Trade
The movement of goods and services among nations without political or economical barriers
What is balance of trade?
Total value of a nation exports compared to its imports over a particular period.
Define Comparative advantage
concept that explains how individuals, businesses, or countries can benefit from specializing in the production of goods or services where they have a lower opportunity cost compared to others.
What is opportunity cost?
When presented with multiple opportunities, the cost of making a certain choice in comparison to its alternative(s).
Define Absolute Advantage
Refers to the superiority of a country or business to produce a particular good
What is Dumping?
The practice of selling exported goods below the price producers would normally charge in their home markets
Define trade protectionism
The use of government regulations to limit the import of goods and services.
What are tarrifs?
A tax imposed on import
Define protective and revenue tariffs
Protective - Import Taxes to protect domestic market
Revenue - Raise money for government
What are import quotas?
A limit on the number of products in certain categories that a nation can import
Define tariff quotas
Combines a quota with a tariff -> low tariff applied to imports with a certain quota
What is an embargo?
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country
Define Subsidies
Financial or economic support provided by the government to domestic industries
What tare tax breaks?
Low interest loans or grants.
What is devaluation?
deliberate reduction in the value of a country’s currency relative to another currency, a basket of currencies, or a standard like gold
What are the 6 strategies for reaching global markets?
(Little Elephants Fly Carefully Into Valleys)
1.Licensing
2.Exporting
3.Franchising
4.Contract Manufactories
5.International Joint 6.Ventures and Foreign direct investments
What is licensing?
A firm (the licensee) allows a foreign company (the licensor) to produce its product in exchange for a fee (royalty)
define Contract Manufacturing
A foreign company’s production of private-label goods to which a domestic company then attaches its own brand name or trademark; part of the broad category of outsourcing
Define International Joint Ventures
Joint Ventures - A partnership in which two or more companies often from different countries joint to undertake a major project (separate legal entity is formed)
Define Strategic Alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Define Foreign Direct Investment
The buying of permanent property and business in foreign nations
What is a foreign subsidiary?
A company owned in a foreign country be another company, called the parent company
