Term
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Definition
| the ability of a country to produce a good using fewer resources than another country |
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Term
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Definition
| the ability of a country to produce a good at a lower (opportunity) cost than another country |
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Term
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Definition
| the cost of a good is the amount of another good that must be given up to release enough resources to produce the first good |
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Term
| marginal rate of transformation (MRT) |
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Definition
| the amount of one good that a country must forego to produce each additional unit of another good. This is another name for opportunity cost |
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Term
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Definition
| the increase in world production and consumption resulting from specialization and trade |
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Term
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Definition
| the gains from trade that occur over time because trade causes an increase in a country's economic growth or induces greater efficiency in the use of existing resources |
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Term
| Name one of the four kinds of dynamic gains from trade listed in Chapter 2. |
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Definition
1. a country engaging in international trade uses its resources more efficiently.
2. specialization leads to increasing returns to scale.
3. prices lower, but quality will increase in firms that cannot compete with price.
4. international trade enhances competition in a country's domestic market, reducing the chance of monopoly power to affect market pricing |
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Term
| production possibilities frontier (PPF) |
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Definition
| a curve showing the various combinations of two goods that a country can produce when all of a country's resources are fully employed and used in their most efficient manner |
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Term
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Definition
| the amount of a good (assumed to be unchanging) that a country must forego to produce each additional unit of another good |
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Term
| trading possibilities curve |
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Definition
| a curve showing the various combinations of two good that a country can consume through international trade |
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Term
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Definition
| the relative price at which two countries trade goods |
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Term
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Definition
| the interaction of the demand by two countries for the other country's export good in determining the international exchange ratio |
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Term
| factor-proportions theory |
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Definition
| the theory that states that a country's comparative advantage is based on its endowment of the factors of production |
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Term
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Definition
| the market condition where there are many buyers and sellers of a good or factor of production and each buyer and seller has no control over the price of the good or factor |
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Term
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Definition
| resource inputs--e.g., labor and capital--used to produce goods |
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Term
| constant returns to scale |
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Definition
| a production condition in which proportionate changes in factors of production lead to proportionate changes in output |
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Term
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Definition
| the situation where the production of a good requires a high capital-to-labor ratio compared with that of another good |
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Term
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Definition
| the situation where the production of a good requires a low capital-to-labor ratio |
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Term
| capital-to-labor ratio (K/L) |
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Definition
| the amount of capital per unit of labor used to produce a good |
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Term
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Definition
| the situation where a country has a high capital-to-labor ratio relative to another county |
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Term
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Definition
| the situation where a country has a low capital-to-labor ratio relative to that of another country |
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Term
| factor-price equalization theorem |
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Definition
| the premise that international trade will reduce or equalize factor prices between countries |
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Term
| Stopler-Samuelson theorem |
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Definition
| the premise that international trade will reduce the income of the scarce factor of production and increase the income of the abundant factor of production within a country |
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Term
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Definition
| a factor of production is specific to an industry or is immobile between industries |
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Term
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Definition
| a factor of production that can move between industries or is mobile between industries |
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Term
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Definition
the empirical finding that U.S. industries with trade surpluses were more labor intensive than U.S. industries with a trade deficit.
This is contrary to the factor-production theory |
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Term
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Definition
| the education, training and job skills embodied in labor which increases its productivity |
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Term
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Definition
| the flow of foreign assets into a country or the flow of a country's assets abroad |
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Term
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Definition
| the movement of labor from one country to another |
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Term
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Definition
| the country that sends the factor of production to another country |
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Term
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Definition
| the country that receives the factor of production from another country |
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Term
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Definition
| a government policy designed to stimulate the development and growth of an industry |
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Term
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Definition
| a foreign operation incorporated in the host country and owned by a parent corporation in the source country |
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Term
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Definition
| a multinational corporation as if it were a domestic firm, thus eliminating legal and/or regulatory restrictions that otherwise might apply to it as a foreign firm |
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Term
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Definition
| the over-pricing of under-pricing of goods in intrafirm trade of multinational corporations that is designed to shire income and profits from high-tax to low-tax countries |
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