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https://quizlet.com/_43492x

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https://docs.google.com/document/d/1j_fykP_vKq9wn4cIQLxKnLrOW1PguGKGjRvfVrEsKMU/edit

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no exports or imports

total surplus is maximized at equilibrium for domestic price/quantity

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comparative advantage: ability to produce a good at a lower opportunity cost than another producer

- if world price > domestic price... EXPORT
- if world price < domestic price... IMPORT

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Gains and Losses of an Exporting Country

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Gains and Losses of an Exporting Country

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domestic sellers better off because selling at a higher price
-- gains of winners exceed losses of losers

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Before Exporting
CS: AB
PS: C
TS: ABC

After Exporting
CS: A
PS: BCD
TS: ABCD

D = gain from trade

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Gains and Losses of an Importing Country

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Gains and Losses of an Importing Country

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domestic buyers better off because buying at lower price
-- gains of winners > losses of losers

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Before Importing
CS: A
PS: BC
TS: ABC

After Importing
CS: ABD
PS: C
TS: ABCD

D = gain from trade

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reduce quantity demanded domestically

*government revenue*

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Before Tariff
CS: ABCDEF
PS: G
gov rev: none
TS: ABCDEFG

After Tariff
CS: AB
PS: CG
gov rev: E
TS: ABCEG

DF = deadweight loss

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*money to license holders*

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Before Quota
CS: ABCDEF
PS: G
gov rev: none
license: none
DW: none

After Quota
CS: AB
PS: CG
gov rev: none
license: E
DW: DF

DF = deeadweight loss
E = license holder surplus

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Trade increases the variety of goods and competition

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Trade increases the variety of goods and competition

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lowers costs through economies of scale

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trading with other countries destroys domestic employment

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advancement in a certain industry is vital for national security so there is no need to trade

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trade restrictions are needed to help an industry get started or to help adjust to new conditions

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only trade if all countries play by the same rules

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the threat of trade restriction from the domestic country could help remove a trade restriction imposed by a foreign country