PLSC 117 Final Key Terms (100% Accurate)

Comparative advantage correct answers The ability of a country or firm to produce a particular good or service more efficiently than other goods or services, such that its resources are most efficiently employed in this activity. The comparison is to the efficiency of other economic activities the actor might undertake, not to the efficiency of other countries or firms. Absolute advantage correct answers The ability of a country or firm to produce more of a particular good or service than other countries or firms using the same amount of effort and resources. Heckscher-Ohlin trade theory correct answers The theory that a country will export goods that makes intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor. Protectionism correct answers The imposition of barriers to restrict imports. Commonly used protectionist devices include tariffs, quantitative restrictions (quotas), and other nontariff barriers. Trade barriers correct answers Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods, and health and safety standards that discriminate against foreign goods. Tariff correct answers A tax imposed on imports; this raises the domestic price of the imported goods and may be applied for the purpose of protecting domestic producers from foreign competition. Quantitative restriction (quota) correct answers Quantitative limit placed on the import of particular goods. Nontariff barriers to trade correct answers Obstacles to import other than tariffs (trade taxes). Examples include restrictions on the number of products that can be imported (quantitative restrictions, or quotas); regulations that favor domestic over imported products; and other measures that discriminate against foreign goods or services. Stolper-Samuelson theorem correct answers The theory that protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin approach: if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor- scarce country, labor benefits from protection and loses from trade liberalization. Ricardo-Viner (specific- factors) model correct answers A model of trade relations that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin approach, for which the nature of the factor—labor, land, capital—is the principal consideration.