LC6: LearningCurve - Ch. 6: Gains from Trade

What are the gains from trade?

The benefits that come from reallocating resources, goods, and services to better uses

The result of South Korea adopting a market economy is that the country:

experiences gains from trade.

A(n) _____ market is a market whose payoff is linked to whether an uncertain event occurs.

prediction

Potential buyers and potential suppliers communicate through:

price.

Google has discovered that _____ can allocate its resources more efficiently than their managers can.

the forces of supply and demand

After Christmas, you and your friend talked about the gifts that you received. Your friend happens to have the stuff you love and you also have stuff he pines for. So, both of you trade stuff and feel better off for getting something each of you prefers to have. What do we call the benefits that you get from reallocating stuff to better uses?

Gains from trade

Ally and Zoe are roommates that alternate their chores each month. Zoe compares her time spent on each chore to that of Ally and found that Ally has the best ability to do the chores in the least amount of time. She suggests that Ally should do all chores. The concept that Zoe used is called _____, which does not apply the costs like economists do.

absolute advantage

Some people argue that international trade has no benefit and causes damage to domestic markets. The critics overlook the fact that comparative advantages drive the international trade, and that international trade makes people better off because they can get stuff:

at the lowest opportunity cost.

In a market, both buyers and sellers are motivated by a price because the price:

embodies information.

As a manager, you have to decide specific tasks for each person in your team. You should focus on _____ because you want to minimize what you have to give up to get the task done.

opportunity cost

When a good becomes more popular, its price rises. This change in price is a(n) _____ creating a line of communication between buyers and sellers.

signal

As a manager, you assign one task to each member of your team based on each member's comparative advantage. Logan, one of your teammates, argues that he is best at everything and wants to do multitasking. How would you explain to Logan the benefits of reallocating tasks?

If he focuses on the task for which he has a comparative advantage, the whole group will produce more.

When decision makers experience a knowledge problem, they _____ because the information they need is too broadly dispersed.

are unable to make a good decision

Unlike South Korea's leader, the leader of North Korea:

centralizes power and directs all economic activities.

An example of gains from trade is that people sell their labor for money and spend that money on food because:

people want that food more than they want another hour of time.

The skyrocketing price of quinoa sent a signal to:

quinoa farmers to sell more quinoa.

For potential buyers, a rising price _____ of consuming a good, creating an incentive to consume less.

raises the opportunity cost

A company should _____ to allocate its scarce resources to the best use.

use internal markets