locations

tariffs taxes that governments place on imported goods

value chain how a good is produced in stages

Key Concepts and Summary

19.1 Absolute and Comparative Advantage

A country has an absolute advantage in those products in which it has a productivity edge over other countries;

it takes fewer resources to produce a product. A country has a comparative advantage when it can produce a

good at a lower cost in terms of other goods. Countries that specialize based on comparative advantage gain

from trade.

19.2 What Happens When a Country Has an Absolute Advantage in All Goods

Even when a country has high levels of productivity in all goods, it can still benefit from trade. Gains from

trade come about as a result of comparative advantage. By specializing in a good that it gives up the least to

produce, a country can produce more and offer that additional output for sale. If other countries specialize in
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