2. Amaliy mashg‘ulotlari 1- jadval № Amaliy mashg‘ulotlar mavzulari

Ex. 6. Complete the following sentences, use the prompts below: 
1. ________________ means that each nation specializes in a product for 
which its opportunity cost is lower in terms of the production of another 
product and then nations trade. 
2. ________________ benefits a nation as a whole but individuals may lose 
jobs and incomes from the competition from foreign goods and services. 
3. A government’s use of embargoes, tariffs, quotas, and other methods to 
protect particular domestic industries by imposing barriers that reduce imports 
is called ___________. 
180 
4. A (an) ________________ prohibits the import or export of particular 
goods and a (an) __________________ discourages imports by making 
them more expensive. These trade barriers often result primarily from domestic 
groups that exert political pressure to gain from these barriers. 
5. The _________________ is a summary bookkeeping record of all the 
international 
transactions a country makes during a year. It is divided into 
different accounts including the current account, the capital account and the 
statistical discrepancy. 
6. The __________________ measures only goods (not services) that a nation 
exports and imports. It is the most widely reported and largest part of the 
current account. 
7. A (an) _________________ is the price of one nation’s currency in terms 

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of another nation’s currency. The intersection of the supply and demand curves 
for dollars determines the number of units of a foreign currency per dollar. 
8. A __________________ is a limit on the quantity of a good that may be 
imported in a given time period. 
The Arguments for and against Free Trade 
The effects of free trade can be determined by comparing the domestic price 
without trade to the world price. A low domestic price indicates that the country 
has a comparative advantage in producing the good and that the country will 
become an exporter. A high domestic price indicates that the rest of the world 
has a comparative advantage in producing the good and that the country will 
become an importer. When a country allows trade and becomes an exporter of a 
good, producers of the good are better off, and consumers of the good are worse 
off. When a country allows trade and becomes an importer of a good, 
consumers are better off, and producers are worse off. In both cases, the gains 
from trade exceed the losses. The other economic benefits of trade are: 
Increased variety of goods: 
Goods produced in different countries are not 
exactly the same. Free trade gives consumers in all countries greater variety 
from which to choose. 
Lower costs through economic of scale: 
Some goods can be produced at low 
cost only if they are produced in large quantities 
–
a phenomenon called 
economies of scale. 
A form in a small country cannot take full advantage of 
economies of scale if it can sell only in a small domestic market. Free trade 
gives firms access to larger world markets and allows them to realize economies 
of scale more fully. 
Increased competition: 
A company shielded from foreign 
competitors is more likely to have market power, which in turn gives it ability 
to raise prices above competitive evels. This is the type of market failure. 
Opening up trade fosters competition and gives the invisible hand a better 
chance to work its magic. 

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Enhanced flow of ideas: 
The transfer of technological advances around the 
world is often thought to be linked to international trade in the goods that 
embody those advances. 
There are various arguments for restricting trade: They are as follows: 
–
to 
protect strategic industries 
–
notably agricultural 
–
without which the country 
would be in danger if there was a war. 
–
to make imports more expensive than home-produced substitutes, and thereby 
reduce a balance of payment deficit; 
–
as a protection against dumping (the selling of goods abroad at below cost 
price in order to destroy or weaken competitors or to earn foreign currency to 
pay for necessary imports); 
–
to retaliate against restrictions imposed by other countries; 
–
to protect 
‘
infant industries
’
until they are large enough to achieve 
economies 
of scale and strong enough to compete internationally. 
Economists and the general public often disagree about free trade. In 1933, for 
example, the United States faced the question of whether to ratify the North 
American Free Trade Agreement, which reduced trade restrictions among the 
United States, Canada, and Mexico. Opinion polls showed the general public in 
the United States about every split on the issue, and the agreement passed in 
Congress by only a narrow margin. Opponents viewed free trade as a threat to 
job security and the American standard of living. By contrast, economists 
overwhelmingly supported the agreement. They viewed free trade as a way of 
allocating production efficiently and raising living standards in all three 
countries. To better understand economists
’
view of trade, let
’
s suppose that 
the imaginary country of Isoland ignores the advice of its economics team and 
decides not to allow free trade in steel. The country remains in the equilibrium 
without international trade. 

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Then, one day, some Isolandian inventor discovers a new way to make steel 
at very low cost. The process is quite mysterious, however, and the inventor 
insists on keeping it a secret. What is odd is that the inventor doesn’t need any 
workers or iron to make steel. The only input he requires is wheat. The inventor 
is hailed as genius. Because steel is used in so many products, the invention 
lowers the cost of many goods and allows all Isolandians to enjoy a higher 
standard of living. Workers who had previously produced steel do suffer when 
their factories close, but eventually they find work in other industries. Some 
become farmers and grow the wheat that the inventor turns into steel. Others 
enter new industries that emerge as a result of higher Isolandian living 
standards. Everyone understands that the displacement of these workers is an 
inevitable part of progress. 
After several years, a newspaper reporter decides to investigate this mysterious 
new steel process. She sneaks into inventor’s factory and learns that the 
inventor is a fraud. The inventor has not been making steel at all. Instead, he has 
been smuggling wheat abroad in exchange for steel from other countries The 
only thing that the inventor has discovered was the gains from international 
trade. 
When the truth is revealed, the government shuts down the inventor’s operation. 
The price of steel rises, and workers return to jobs to steel factories. Living 
standards in Isoland fall back to their former levels. The inventor is jailed and 
held up top public ridicule. After all, he was no inventor. He was just an 
economist.