ECON 103 Chapter Notes - Chapter 9 &14: Absolute Advantage, Comparative Advantage, Opportunity Cost

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goldshark321

13 Jan 2017

School

University of Illinois

Department

Economics

Course

ECON 103

Professor

Mc Dermott Eric

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Document Summary

World price: the price of a good that prevails in the world market for that good. Comparative advantage: the ability to produce a good at a lower opportunity cost than another producer. Absolute advantage: the ability to produce a good using fewer inputs than another producer. Tariff: tax on goods produced abroad and sold domestically, only matters for imports. Finance: the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk. Present value: the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money. Future value: the amount of money in the future that an amount of money today will yield given prevailing interest rates. Compounding: the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future.

Related Questions

How can trade enhance the economic well-being of a nation?

a) trade puts downward pressure on the prices of all goods

b) trade results in an increase in total surplus compared with a closed economy

c) the gains of domestic producers of a good exceed the losses of domestic consumers of the good, regardless of whether the nation imports or exports the good in question

d)both domestic producers and domestic consumers become better off with trade, regardless of whether the nation imports or exports the good in question.

lavenderyellowjacket825

12.
(Points: 2)
When a country allows trade and becomes an importer of agood,

a. the losses of the losers exceed the gains of the winners.
b. everyone in the country benefits.
c. the gains of the winners exceed the losses of the losers.
d. everyone in the country loses.

burgundymole821

1. If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.

Is the statement true or false?

2. When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that:

	a.	The domestic price will fall after trade opens up.
	b.	The total surplus for this good will increase as a result of opening up the market to international trade.
	c.	Opening the market to international trade will create a deadweight loss.
	d.	Both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade.

cyanturtle416

ECON 103 Chapter Notes - Chapter 9 &14: Absolute Advantage, Comparative Advantage, Opportunity Cost

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