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Chapter Objectives

After reading this chapter you should be able toUnderstand with whom we trade, in what goods we trade, and that international trade benefits both trade partners and why. Know the principles of absolute and comparative advantage and why they are important in proving the benefits from trade. See that there are reasons for limiting trade and know the mechanisms for doing so. Understand that limiting trade protects some industries and jobs, but at a very high cost. See that the use of trade as a diplomatic weapon has been largely a failure.