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UNIT VII INTERNATIONAL TRADE CHAPTER 17. STANDARDS Examine absolute and comparative advantage, and explain why most trade occurs because of comparative.

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Presentation on theme: "UNIT VII INTERNATIONAL TRADE CHAPTER 17. STANDARDS Examine absolute and comparative advantage, and explain why most trade occurs because of comparative."— Presentation transcript:

1 UNIT VII INTERNATIONAL TRADE CHAPTER 17

2 STANDARDS Examine absolute and comparative advantage, and explain why most trade occurs because of comparative advantage. Discuss the effects of barriers to trade and why nations sometimes erect barriers to trade or establish free trade zones. Differentiate and draw conclusions about historical economic thought theorized by economists.

3 PAGE 49 – BENEFITS AND ISSUES OF INTERNATIONAL TRADE Specialization occurs when narrow range of products made Increased productivity and profit Economic interdependence – reliance on others for products not made Absolute advantage – nation’s ability to make product more efficiently Due to uneven distribution of production factors in different areas Comparative advantage – ability to produce at lower opportunity cost Absolute cost of product not important, just opportunity cost Law of Comparative Advantage – countries gain when produce items they are most efficient at production and are at the lowest opportunity cost Answer questions: 1 – 6 on page 540

4 PAGE 50 – AFFECTS NATIONAL ECONOMY AND TRADE BARRIERS Exports – goods and services produced in one country, sold in another Imports – products produced in one country, purchased by another Barriers to Trade Most nations pass trade limit laws to protect domestic industries Laws lead to higher prices, economic retaliation by other nations Industries, in the long run, can only be saved by becoming competitive Trade restrictions are basically a political issue Trade Barrier – law limiting free trade among nations; most mandatory Quota – limits on the amount of a product that can be imported Dumping – sale of product in other country at lower price than at home - hurts domestic producers; gives consumers lower price Bottom Half: 1 – 8 on Page 540.


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