International Trade and Public Policy - AP Microeconomics

What is a non-tariff barrier?

Trade restrictions other than tariffs, like quotas. Regulatory barriers beyond tariffs.
What is a customs union?

A group of countries with common tariffs on non-members. Unified external trade policy among members.
Identify the term for a government payment to encourage production.

Subsidy. Financial aid to boost domestic production.
Define dumping in international trade.

Selling goods below production cost to capture market share. Predatory pricing to eliminate competition.
What is the impact of tariffs on consumer surplus?

Consumer surplus decreases. Higher prices reduce consumer benefit.
What is the infant industry argument?

Protection for new industries to help them grow. Temporary protection until industry matures.
Identify the effect of tariffs on government revenue.

Government revenue increases. Tariff collections increase public funds.
Which policy tool can lead to trade wars?

Tariffs. Retaliatory tariffs escalate between countries.
Identify the effect of a quota on domestic prices.

Domestic prices increase. Limited supply raises equilibrium price.
Define absolute advantage.

Ability to produce more of a good with the same resources. Higher productivity with identical inputs.
What is the effect of quotas on producer surplus?

Producer surplus increases. Limited imports raise domestic producer profits.
State the formula for calculating opportunity cost.

$\frac{\text{Loss in Good Y}}{\text{Gain in Good X}}$ . Measures what must be sacrificed to gain one unit.
What is a trade bloc?

A regional group of countries with a formal trade agreement. Economic partnership with preferential terms.
State one benefit of free trade.

Increased economic efficiency. Specialization leads to optimal resource allocation.
What is the purpose of trade barriers?

To protect domestic industries. Shield local firms from foreign competition.
What is the purpose of anti-dumping policies?

To prevent foreign firms from selling below cost. Counter unfair pricing practices.
What is economic integration?

Unification of economic policies between different states. Coordination of trade and economic policies.
What is the WTO?

World Trade Organization. International body governing global trade rules.
Identify a common reason for imposing tariffs.

Protect domestic employment. Preserve jobs from foreign competition.
Which organization helps resolve trade disputes?

World Trade Organization (WTO). International arbitrator for trade conflicts.
What is a tariff?

A tax on imported goods. Raises import prices to protect domestic producers.
What is the main goal of trade liberalization?

To reduce trade barriers. Promotes free market competition globally.
Identify the effect of a tariff on the quantity of imports.

Quantity of imports decreases. Higher prices reduce import demand.
Identify the term for a legal ban on trade with a particular country.

Embargo. Complete prohibition of trade relations.
What is a trade agreement?

A treaty between two or more nations to outline trade terms. Formal contract reducing trade barriers.
Identify the term for restrictions on the quantity of goods imported.

Quota. Limits physical amount, not price.
Define a trade embargo.

A government order to restrict trade with a country. Complete ban on trade for political reasons.
What does the term 'trade surplus' mean?

Exports exceed imports. Positive net exports indicate competitive economy.
What is the difference between a tariff and a subsidy?

Tariff is a tax; subsidy is a government payment. One restricts imports, other supports exports.
State the formula for net exports.

Net Exports = Exports - Imports. Measures country's trade balance.
Identify the term for a tax on exports.

Export tariff. Tax on goods leaving the country.
What is protectionism?

Economic policy of restraining trade to protect domestic industries. Uses barriers to shield domestic markets.
What is the definition of comparative advantage?

Ability to produce at a lower opportunity cost. Trade based on what you give up least to produce.
What is an import license?

A permit allowing the importation of certain goods. Legal permission for specific imports.
What is the balance of trade?

Difference between exports and imports value. Net flow of goods in international trade.
What is the effect of subsidies on domestic producers?

Increased production and competitiveness. Lower costs boost domestic market position.
What does the term 'trade deficit' mean?

Imports exceed exports. Negative net exports show trade imbalance.

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