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Definition
| Labor matters but not because of quality of labor but because of quality of inputs |
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Definition
| We trade because of differences in quality of labor. In some places people are more productive |
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Term
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Definition
| It is not differences in quality of inputs but QUANTITY of inputs |
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Term
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Definition
| Economies of Scales due to specialization |
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Term
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Definition
| Tastes: people want variety of goods |
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Term
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Definition
| We trade because firms want us to. Product cycle theory: when product first developed produced in wealthy nation, then in nation with cheap capital, and then in nation with cheap labor. |
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Term
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Definition
| We trade because we are close |
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Definition
| Trade due to government subsidies |
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Term
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Definition
1)National Security/Autonomy
2)Direct Foreign Investment
3)Externalities
4)Protect infant/senile industry
5)Dualism
6)Negociation
7)Optimum Tariff |
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Term
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Definition
| Good that is nonrival (more than one person can enjoy at the same time) and nonexcludable (cannot stop someone else from enjoying it) |
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Term
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Definition
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Term
| Private Solutions to Externalities |
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Definition
1) Internalization
2) Socialization (consumer activism)
3)Coase Theorem |
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Term
| Public Solutions to Externalities |
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Definition
1) Regulation
2) Pigovian tax
3) Pigovian subsidy
4) Create markets |
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Term
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Definition
| If property rights are clear and transaction costs are low then externalities can be eliminated by private markets |
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Term
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Definition
| People do not feel obligated to take care of or contribute to public good because they can get it for free so decide not to |
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Term
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Definition
| Pubic goods are not taken care of because of "free riders" problem |
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Term
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Definition
| Firms and labor do not know everything before a contract is signed |
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Term
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Definition
| There is uncertainty after a contract is signed that it will be upheld |
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Term
| Solutions to Moral Hazard |
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Definition
1) incentives
2) Efficiency wage theory
3)monitoring |
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Term
| Solution to Akellof "market of lemons" problem |
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Definition
Signaling Solution
-certification process, warranties, money back guarantees
-all these are very expensive for low quality good but inexpensive for high quality good |
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Term
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Definition
1) Quality of goods is the same
2) Entry and exit into market is easy
3) Buyers are numerous and small
4) Consumers are Producers are price takers
5) Consumer and Producers have knowledge of market conditions |
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Term
| Technological Efficiencies |
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Definition
| Create most amount of outputs given number of inputs |
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Term
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Definition
| Producing at lowest cost possible |
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Term
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Definition
| There are no transactions between consumers that makes them both better off |
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Term
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Definition
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Term
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Definition
Consumer efficiency, production efficiency, exchange efficiency, technology efficiency
-impossible to achieve |
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Term
| Ways to measure market power distribution of industry |
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Definition
1) four firm index- how much market share do top four firms own as expressed in percents
2) HHI- Take top 50 industries, square each percent of market power share and then add them. If above 1800 then oligopoly and will be investigated |
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Term
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Definition
1)natural resources
2) intelligence (patent)
3) government mandated
4) High start up costs |
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Term
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Definition
| Multiple producers of similar product that are each trying to convince consumers that they are monopolies |
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Term
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Definition
| Few sellers (leads to game theory) |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| Game Theory: when one actor make a decision based on what they know about other actors decision. Player best response according to the decisions of the other |
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Term
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Definition
| Game Theory: OTher players decision does not affect yours. You will make the same decision no matter what the other player chooses |
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Term
| What are the goals of the World Trade Organization? |
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Definition
1) Government subsidies are prohibited
actionable-if someone complains they have a just cause
nonactionable- they have just reason for subsidizing
2) Promote tariffs because they are more transparent that quotas |
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Term
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Definition
| Country can shut down trade with another if they are unsure about health/safety concerns even if not proven |
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