Free trade.
Free trade can be defined as a situation where governments impose no artificial barriers to trade that restrict the free exchange of goods and services between countries with the aim of shielding domestic producers from foreign competitors.
The argument for free trade is based on the economic concept of comparative advantage. The principle of comparative advantage states that even if one country can produce all goods more efficiently than another country, trade will still benefit both countries if each specialists in the production of the good in which it is comparatively more efficient. This comparative efficiency is measured by the opportunity cost of producing each good within that country. "Why do countries restrictes trade" by mjmfoodie (http://youtu.be/Y2X3KPilAt0)
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KEY termsComparative advantage
is the economic principle that nations should specialise in the areas of production in which they have the lowest opportunity cost and trade with other nations, so as to maximise both nations’ standards of living. Opportunity cost represents the alternative use of resources. Often referred to as the ‘real’ cost, it represents the cost of satisfying one want over an alternative want. This is also known as economic cost. |