Absolute advantage is producing more with the same resources; comparative advantage is producing at the lowest opportunity cost.

Output problems focus on quantity produced with fixed resources; input problems focus on resources needed for a fixed quantity.

Favorable means a country can buy more imports with the same exports; unfavorable means it needs to export more for the same imports.

Output: give up/gain; Input: gain/give up.

Exporting is selling domestic goods to foreign buyers; importing is buying foreign goods for domestic use.

Tariffs restrict imports by increasing their price; subsidies encourage exports by lowering production costs.

Strong exchange rates make exports more expensive and imports cheaper, potentially worsening the trade balance; weak exchange rates do the opposite.

Specialization increases efficiency but makes a country vulnerable to shocks in a specific sector; diversification reduces vulnerability but may sacrifice some efficiency.

Short-run: disruption and job losses in uncompetitive industries; long-run: reallocation of resources to competitive industries and overall economic growth.

Free trade emphasizes minimal government intervention and open markets; fair trade incorporates social and environmental considerations, often involving higher prices for producers in developing countries.

The ability to produce more of a good/service than another producer using the same resources.

The ability to produce a good/service at the lowest opportunity cost.

The rate at which one good can be exchanged for another.

Focuses on how much can be produced with a given set of resources.

Focuses on how much of a resource is needed to produce one unit of a good.

The value of the next best alternative that is forgone when making a decision.

A situation in which a country or firm focuses its resources on producing a limited range of goods and services.

Goods and services that are produced domestically and sold to buyers in other countries.

Goods and services that are produced in other countries and purchased by domestic buyers.

A country can buy more imports with the same amount of exports.

Countries export goods/services in which they have a comparative advantage and import those in which they don't.

Comparative advantage considers opportunity costs, leading to more efficient global resource allocation and higher overall production.

Favorable terms of trade (higher export prices relative to import prices) improve a country's welfare by allowing it to buy more imports with the same amount of exports.

By focusing on goods/services with lower opportunity costs, countries become more efficient, increasing global output.

Exchange rate fluctuations alter relative prices of exports and imports, impacting the quantity of imports a country can obtain for a given quantity of exports.

Increased demand for a country's exports can improve its terms of trade by increasing export prices.

If another country has a comparative advantage, importing allows the domestic country to specialize in other goods, increasing overall efficiency.

New technologies can alter production costs and opportunity costs, potentially shifting comparative advantages between countries.

Tariffs increase the cost of imported goods, potentially shifting consumption towards domestically produced goods, even if the country lacks a comparative advantage.

Subsidies lower the cost of producing goods, potentially allowing a country to export goods even if the country lacks a comparative advantage.