T1 Free Trade Protection 1 PPT Flashcards
(15 cards)
❓ What is a closed market?
A market where a country does not trade with the outside world.
What is specialisation?
When a country focuses on producing goods it is best suited for.
What is an open market?
💡 A market where a country imports and exports goods and services.
Why do nations trade?
Because it is advantageous—trade allows countries to specialise.
For specialisation to work, what must happen?
💡 Surplus goods must be traded for non-specialised goods and services.
What is absolute advantage?
The ability of a country to produce more of a good using the same amount of resources.
If a country has an absolute disadvantage in all products, what does that mean?
It produces less of every good compared to another country.
What does comparative advantage determine?
What a country should specialise in.
What is comparative advantage?
The ability to produce a good at a lower opportunity cost than another country.
How do you calculate opportunity cost?
Opportunity cost = What is given up / What is gained.
Can a country have a comparative advantage in more than one good?
No, only in one good.
What should countries do based on comparative advantage?
Specialise in producing goods where they have a comparative advantage.
If Australia has a comparative advantage in computers, what should it do?
Specialise in computers and trade for other goods.
What factors affect comparative advantage?
Human, natural, and capital resources
Technological progress
Climate and natural resource availability
What are some examples of comparative advantage by country?
Australia – Wheat, wool, beef, iron ore
Middle East – Oil
Canada – Forestry
Brazil – Coffee
France – Wine
China – Clothing, electronics
USA – Software, aircraft, entertainment
