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ETS Business Major Field Test: International

International Trade

Absolute Advantage - Occurs when a county uses the same amount of resources to produce more goods than another country.  The country has a lower absolute cost of producing than the good.

Comparative Advantage - Occurs when a country experiences a lower opportunity cost of producing a good than another country.

Trade Gains - Will be received by countries that specialize in the production of goods where they have a comparative advantage, even if each country has an absolute advantage in the production of some goods that it no longer produces after trade.

   Trade gains are shared by countries depending on the relative demand for each countries output.  These demands are reflected in the terms of    trade-ratio of export to import prices.