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21 Cards in this Set
- Front
- Back
5 problems that can frustrate the optimal allocation of defense resources
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1- benefits are hard to measure (how do u define defense)
2- uncertainty w/ regards to technology, budget or benefits 3- global vs. local maxima 4- reallocation prevented by administrative rules 5- incentives of organization prevent the reallocation of resources |
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learning curve
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graphical representation stating what a company's new average costs will be if output doubles
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benefits and costs of having your own DIB (defense industrial base)
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1- always have ur own supply keeping you independent of relying on other countries
2- keeps you from being overcharged by countries that would have you as their customer 3- can provide economic benefit for your company 4- keeps you from losing technologies to other countries |
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cost-shifting
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process of increasing revenue from one customer as means of transferring that $$ to compensate for the costs of other customers
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5 economic causes of civil war
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1- poverty
2- economic inequality 3- greed 4- ethnic dominance 5- contest to control valuable resources |
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2 ways in which trade can make war more likely
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1- war may be a means of protecting raw materials
2- a third party may try and start war w/ trading parties as a means of damaging them economically |
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difference b/t vertical income inequality & horizontal income inequality
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vertical- inequality b/t rich & poor
horizontal- inequality b/t ethnic, political or religious groups |
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4 ways that trade may decrease the likelihood of war?
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1- promotes cross-cultural learning
2- living standards would be lower w/o trade 3- compromises economic growth w/o a strong trade sector 4- trade creates a strong middle class who usually promote democracies which are reluctant to go to war |
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3 ways in which poverty can contribute to civil war
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1- poverty can lead to failed institutions (corrupt cops)
2- disease can cripple the economy (poor health care) 3- no social welfare system to help people in distress (desperate people can do desperate things) |
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6 ways in which valuable resources can contribute to civil war
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1- $$ from resources can provide a method of financing for rebel groups
2- if resources are concentrated in one part of the country then that part may try to break off forming its own country 3- many resources may invite neighboring countries in to steal them 4- income from resource sales can create income inequalities or tensions 5- easy $$ from resource sale can help to put off economic reforms that would make the country more stable 6- reliance on exporting goods makes a country vulnerable to export trade shocks |
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4 reasons that cost estimates are often wrong
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1- overly optimistic
2- changes in original plans 3- unexpected inflation 4- changes in average total costs b/c of quantity changes |
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7 characteristics of defense production
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1- emphasis on high performance weapons
2- a risk undertaken by the government 3- heavy contract regulation 4- close relations b/t contractors, military and government officials 5- military services have incentives to spend the entire budget 6- outside of US firms are state owned monopolies (puts political pressures on everyone) 7- costs are spread out w/ increased production (encourages foreign sales) |
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4 barriers to entry in the defense business
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1- US government is the only market (or thru them)
2- demand is not likely price elastic (new low price competitors have little effect) 3- patents reduce competition 4- political considerations make it hard for new firms to enter |
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5 things that disarmament can mean
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1- destroy stockpiles of weapons
2- reduce the number of troops in foreign countries 3- cut back on R&D 4- reductions in military expenditures 5- limitations on arms transfers |
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4 reasons for international arms sales
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1- benefits ur economy
2- helps ur allies protect themselves 3- can further ur political goals 4- economies of scale can be achieved which can lower costs (spreading out fixed costs) |
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buggin's turn
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rotation of the defense expenditures received b/t the four branches of military (Navy this year, Army next year)
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2 problems associated w/ second source contracting
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1- more firms thatre involved in the production process, the more of a burden it places on the management team (government)
2- since cooperation is necessary, will firms be willing to share proprietary info with each other? |
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"moral hazard" is defense contracting
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the least cost isnt known to the government b/c they cant directly observe the efforts to minimize costs
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adverse selection in military contracting
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occurs b/c government doesn't know the firm's expected costs
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the 3 types of international defense sales
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1- commercial
2- FMS (foreign military assistance) 3- MAP (military assistance program) |
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golden arches theory
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when a country can reach the economic level where they can build a McDonalds then people would rather not worry about war but rather wait in line for hamburgers
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