ECON-2006EG Study Guide - Quiz Guide: Nash Equilibrium, Comparative Advantage, Price Controls

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Price control: shortage result: quantity demanded exceeds quantity supplied. Deadweight loss: the decrease in social surplus from a market distortion. Price control effects: lower social surplus, redistribute surplus from one side of the market to the other. Motivation for trade: we can all be better off by trading with one another, because trade allows total production to be maximised. Production possibilities curve (ppc): the relationship between the maximum production of one good for a given level of production of another good. Comparative advantage: the ability to produce a certain good at a lower opportunity cost; determining who has a competitive advantage - compare opportunity costs. Absolute advantage: the ability to produce more of a certain good than other competing producers, given the same amount of resources. Terms of trade: negotiated exchange rate of goods for goods (the gain of trade shrink as partners become more alike) Export - produced domestically, but sold abroad (world market price > domestic price)

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