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