2.  Tariff – a tax imposed by the government
on imported products
› type
 *Spacific tariff – a fixed tariff imposed on a
unit of imported goods
 * Ad valorem tariff - a tariff imposed on
imported good based on the value of the
good

3.  Quotas – a legal limit on the number of unit
of a particular commodity that can be
imported
 Embargoes – a law that bars trade with
another country
 Import licence – the government can
control the number of importing firms and
the volume of imports throught the
requirement of import licence

4.  Exchange control - control on the
amount of money that is allowed to be
brought into and out of country
 Industries subsidies – the government
provide subsidies to import competing
domestic firm or domestic firm producing
export-based output

6.  The ability of a country to
produce more efficiently than
another country.

7.  There are only two countries in the world.
 Only two goods are produced.
 Free trade exists between these two countries.
 No transportation costs are involved.
 Production is under the law of constant costs.
 Identical production functions between trading
countries.

8. The ability of a country to
produce goods at a lower
opportunity cost than another
country.

9. Desired goods that one has to
forgone to obtain other
goods.