BUS 313 Study Guide

Comparative Advantage

Ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume. -specializes in one activity more efficiently than another activity

Production Possibility Curve

Curve depicting all maximum output possibilities for two goods -each point represents a certain combo of factors

Stopler-Samuelson

Describes relationships between relative prices of output and relative factors rewarded -An increase in the price of the capital-intensive good increases the return to capital and decreases the return to the other factor (labor).

IMF (International Monetary Fund)

Developed to stop/prevent competitive devaluation

Absolute Advantage

Does job more efficiently than another individual or group ability to produce more or better goods and services than somebody else

Autarky

Economic independence of self-sufficiency (no trade)

External Economies of Scale

External to firm; internal to industry. All firms experience average cost as industries grow, affect whole industry

Internal Economies of Scale

Internal cause of decline in average cost of producer as it increase

Competitive Devaluation

International affairs where countries seek to gain a trade advantage over other countries by causing the exchange rate of their currency to fall in relation to other currencies -promotes exports, changing the value of gold

Bretton Woods

Negotiations between US and UK; system for monetary and exchange rate management. Made to prevent competitive devaluation and promote economic growth

Heckscher-Ohlin

Predicts goods and services countries import/export based on factors -specialization doesn't need to be complete

Relative Price

Price of commodity compared to another -taking money out of the equation

Specialization

Production where a country, business, or economy focuses on production to gain greater efficiency with an overall system -separation of tasks within a system

Quota

Quantitative limit on imports. Help regulate the volume of trade between countries and help reduce imports, increase domestic production which restricts foreign competition

GATT/WTO

Rules of trade, WTO houses GATT

Trade Diversion

Shift in producer and imports; lower to higher cost

Trade Creation

Shift in producer, higher cost producer to lower cost producer, increase in consumer surplus and economic welfare

Conditionality

The use of conditions attached to the provision of benefits such as a loan, debt relief or bilateral aid. -changes in economic policy -IMF and World Bank can use conditionality when lending money to another country

Rent Seeking

To obtain economic gain through resources without reciprocating any benefits to society Ex: when a company lobbies the government for loan subsidies, grants or tariffs

World Bank

Where nations contribute; offer assistance to middle-income and low-income countries

Factor Movement

capital; labor between countries

Consumer Surplus

difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price). -consumer benefit; total WTP vs. Market Price, measure of welfare

Globalization

process of interaction and integration among the people, companies, and governments of different nations. -a process driven by international trade and investment and aided by information technology. -can only be stopped by disaster (ex: wars)

Producer Surplus

producer benefit; (total amount received - price accepted by producer)

Tariff

tax on imports used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers