1. Review Concepts Production Possibilities Comparative Advantage
Specialization and Trade
Terms of trade
Consumption Possibilities
Gains from Trade
Productivity and wages
Productivity and exchange rates
Increasing costs:
Price convergence
Less-than-complete specialization
Barriers to trade:
Transportation / transaction costs
Tariffs, etc.
Factor Endowment Theory
Export stuff that uses a lot of your abundant, “cheap” resource (land, labor, capital)
Factor Price Equalization
Other Explanations of Trade
Overlapping demands
Economies of scale and intra-industry trade
Free Trade: Buy Lo – Sell Hi
Price equalization
Consumers Surplus
Producers Surplus
Gains from trade: winners,losers

2. Review Concepts, continued
Tariffs and Trade
Specific tariff/ad valorem tariff
Compound tariff
Effective rate of protection
Tariff impacts
Consumers Surplus DOWN
Producers Surplus up
Tax Revenue up
Deadweight Loss
Production effect
Consumption effect
Non-Tariff Barriers
Quotas
VERs (Voluntary Export Restrictions)
Domestic Content Reqs
Subsidies
Production subsidies
Export subsidies
Government Procurement
Health/Environment Regs
Transport restrictions