MGEA01H3 Lecture 11: Chapter 8 Notes - InternationalTrade

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA01H3
• Professor: Michael Ho

Document Summary

Textbook: microeconomics, second canadian edition, by krugman, wells, au and parkinson. How comparative advantage leads to mutually beneficial international trade. Who gains and who loses from international trade, and why the gains exceed the losses. How tariffs and import quotas cause inefficiency and reduce total surplus. Why governments often engage in trade protection to shelter domestic industries from imports and how international trade agreements counteract this. Imports: are goods and services purchased by another country. Exports: are goods and services sold to another country. Globalization: is the phenomenon of growing economic linkages between countries. The concept of comparative advantage must be reviewed in order to understand why international trade occurs and why economists believe it is beneficial to the economy. A country has a comparative advantage: in producing a good or service if the opportunity cost of producing that good or service is less than for other countries. Figure 1: hypothetical ppf for canada and mexico.