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Chapter 3 Chapter 3 continued Chapter 4 Chapter 4/5 Chapter 5
100
What is Absolute advantage?
The ability of a country to produce more of a good using the same or fewer resources as another country
100
What is opportunity cost?
producing more of a product in a country is the amount of production of the other product that is given up
100
What is increasing marginal costs?
as one industry expands at the expense of others, increasing amounts of the other products must be given up to get each extra unit of the expanding industry's product
100
What is the Heckscher-Ohlin theory?
predicts that a country exports the product (or products) that uses its relatively abundant factor(s) intensively and imports the product (or products) that uses its relatively scare factor(s) intensively.
100
What is the Stolper-Samuelson Theorem?
states that given certain conditions and assumptions, including full adjustment to a new long-run equilibrium, and event that changes relative product prices in a country unambiguously
200
Who is Adam Smith?
Developed Absolute Advantage, promoted free trade, and compared household production to national production
200
What is comparative advantage?
a country will export the goods and services that it can produce at a low opportunity cost and import the good and services that it can produce at a high opportunity cost
200
What is the supply curve?
opportunity cost curve and marginal cost curve
200
What is labor-abundant?
a country has a higher ratio of labor to other factors than does the rest of the world
200
What is Specialized-Factor Pattern?
The more a factor is specialized, or concentrated, in the production of a product whose relative price is rising, the more this factor stands to gain from the change in the product price

the more a factor is concentrated into production of a products whose relative price is falling, the more it stands to lose from the change in product price
300
What is labor productivity?
number of units of output that a worker can produce in an hour
300
What is relative price?
the ratio of one product price to another product price
300
What is indifference curve?
The various combinations of consumption quantities that lead to the same level of well-being or happiness
300
What is labor-intensive?
a product has this if labor costs are a greater share of its value than they are of the value of other products
300
What is Factor-Price Equalization Theorem?
states that given certain conditions and assumptions, free trade equalizes not only product prices but certain conditions and assumptions, free trade equalizes not only product prices but also the prices of individual factors between the two countries
400
What is mercantilism?
European philosophy that believed exports were good, imports were bad, obtaining more gold and silver was important to the wealth of the nation, and trade was a zero-sum activity.
400
What is arbitrage?
buying at the low price in one place and selling at the high price in another place
400
What is the community indifference curve?
shows how the economic well-being of a whole group depends on the whole group's consumption of products
400
What is short-run?
period where laborers, plots of land, and other inputs are tied to their current lines of production
400
What is the United States?
this country is relatively abundant in highly skilled labor and physical capital
500
Who are Adam Smith, David Ricardo, and Karl Marx?
these three men believed labor was the basis of value of a product
500
What is the Production-Possibility Curve (PPC)
shows all combinations of amounts of different products that an economy can produce with full employment of its resources and maximum feasible productivity of these resources
500
What are the terms of trade?
gains from trade depend on this. the price the country receives from foreign buyers for its export products, relative to the price that the country pays foreign buyers for its export products
500
What is long-run?
factors that can move between sectors in response to differences in returns
500
What is Canada?
This country is relatively abundant in forestland




Test 1 Review International Trade

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