closed economy
An economy that has no foreign trade—a situation referred to as autarky.
gains from trade
The increased output attributable to the specialization that is made
possible by trade.
absolute advantage
When one country can produce some commodity at lower absolute cost
than another country.
comparative advantage
When a country can produce a good with less forgone output of other
goods than can another country.
learning by doing
The reduction in unit costs that often results as workers learn through
repeatedly performing the same tasks. It causes a downward shift in the
average cost curve.
terms of trade
The ratio of the average price of a country’s exports to the average price
of its imports.
tariff
A tax applied on imports of goods or services.