ECO 201 Ch3
Markets exist
- as an arrangement that allows buyers and sellers to exchange things - because people are not self-sufficient - because people specialize in the production of one or two products
which of the is NOT a role generally played by the government
All of the above are played by the government - redistributor of income - regulator of business practices - provider of goods and services
country A has a comparative advantage over Country B in the production of shoes if:
Country A can produce shoes at a lower opportunity cost than Country B can
when one country can produce a product at a lower opportunity cost in terms of other goods, that country is said to have
a comparative advantage
the ability of one person or nation to produce a good at a lower absolute cost than another is called
absolute advantage
the production advantage enjoyed by one country over another when it uses fewer resources to produce a product than another country is
an absolute advantage
How can the government make markets more efficient
by protecting private property
trade results from
comparative advantage
a specialized worker doesn't spend time switching from one task to another. This is called
continuity
for country A an export is a good produced in
country A and purchased by residents for country B
according to theory of comparative advantage a country
exports the goods in which it has a comparative advantage
when a specialized worker gains insights into a particular task that leads to better production methods it is called
innovation
social inventions like contracts, patents, insurance and accounting rules improve the workings of markets because they:
make transactions more secure, reward innovation, provide better information about commercial enterprises
most economies have what economists call
mixed economies
when the government helps to enforce contracts
people trade with more confidence and so markets operate efficiently
pollution is an example of market failure because
polluters may be able to avoid bearing the full cost of their decision
a rich nation will trade with poor nation because the
poor nation has the comparative advantage in a product
under a market economy, decisions are guided by
prices
entrepreneurs are driven by
prices and profits
the more times a worker performs a particular task, the more proficient the worker becomes at that task. This is called
repetition
the theory of comparative advantage states that
specialization and free trade will benefit all trading partners
According to the theory of comparative advantage, a country should
specialize and export goods with the lowest opportunity cost
in the united states the primary responsibility for paving highways and running colleges and universities rests with
state government
how do national governments intervene in international trade
they erect barriers to trade through and other restrictions
In modern economies individuals in markets make most of the decisions about
what to produce, how to produce, for whom to produce
division of labor increases productivity because
workers spend less time in switching between tasks, over time workers become more efficient at performing one particular task, ideas to improve production spring from paying close attention to one particular task