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30 Cards in this Set
- Front
- Back
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Agglomeration economics
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usually in industrial nations, firms cluster together or practice vertical integration so to cut production/transport costs
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product life cycle theory
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role of tech innovation as a key determinant of trade. exporter of tech has initial comp adv until usage of that tech becomes universal (foreign production), monopoly position breaks and production process becomes standardized, tech no longer benefits original exporter.
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dynamic comp adv
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government is actively involved in creating comp adv by mobilizing skilled labor, tech and capital, promoting opportunties for change through industrial policy (antitrust immunities, tax incentive, subsidies, loan guarantees, low interest loans, trade protection)
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Law of comparative advantage (p. 14)
-who? |
david ricardo - idea that nations should dedicate time/resources into producing item for which they have relative adv in comparison to other nations
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Openness (p. 9)
-equation |
exp + imp/GDP
percentage of GDP that comes from exp and imp |
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Outsourcing (p.
good? bad? |
allocating production to facilities outside domestic borders
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Autarky – 35
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self-suffiency of an economy, ability to survive without trade
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govt regulatory policies
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impose regulations to pursue goals such as workplace safety, product safety, clean environment
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business services
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products that are "unstorable" - cannot be maintained in inventories (tourism, construction, banking, finance, insurance, medical, legal). competitiveness determined by the skills/capabilities of employees, wages, ability to organize a cooperative effort among workers, equipmt (devel countries = competitive edge.
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transportation costs
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cost of moving a product. intl trade will occur as long as the price differential btw partners is greater than the cost of transport. falling transport costs = trade booms (decreased trade barrier, increased productivity)
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Complete specialization – 37
Partial specialization |
complete specialization - only produce good for which you have comp adv, one commodity
partial specialization - produce primarily comp adv good but continue to produce some of other commodity as well -- less transport costs, etc. will trade but still produce some of that commodity at home |
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terrorism
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new NTB!!
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marginal rate of transformation (MRT)
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slope of the pps (how much of one product must be given up to make an addl unit of another product...pps is usually concave to the origin because of increasing opportunity costs (decreasing marginal productivity)
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Labor theory of value – 29
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labor is the only factor of production and is homogeneous (of one quality)
the cost or price of a good depends exclusively upon the amt of labor needed to produce it all costs of production are equatable to labor. less labor input, lower the cost of production (higher productivity) -- adam smith |
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Indifference curve – 63
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an indiff curve depicts the various combinations of 2 goods that are equally preferred - yield the same level of satisfaction. consumer is indifferent in regard to possible commodity combinations along the curve.
if a nation can achieve a higher indiff curve (more satisfaction) through trade, it will trade. maximum gains from trade occur a tthe point where intl terms of trade line is tangent to a community indiff curve |
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assumptions of david ricardo (comp adv)
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-2 nations, 2 commodities
-perfect competition -factors of production are same -technology is same -same tastes |
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factor endowment theory
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hecksher-ohlin theory - comparitive adv is explained by differences in relative national supply conditions and the role of natural resource endowments
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factor intensity
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the amount of a given factor used in production -- labor or capital intensive...a nation will export an item that uses intensively abundant factor, import items that use scarce factor
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leontif paradox
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discovered the US was exporting labor-intensive goods and not capital-intensive goods, despite being a capital-intensive nation.
why?? -sources of comparitive adv are also based on worker SKILLS -production in terms of domestic demand, not just supply-side -factor endowment theory ignored sub varieties of capital, land and human factors that CHANGE |
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factor price equalization
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as a nation specializes and begins to use more of the abundant factor, demand for that factor rises as it becomes more scarce, and price goes up. similarly, price of the scarce factor falls as supply goes up...so the prices of the scarce and abundant factor equalize.
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theory of overlapping demands
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factor endowment theory explains trade in agricultural goods and primary resources, but not manufacturing
staffan linder caimed that manufactured goods are traded because of domestic DEMAND conditions firms will manufacture products for which there is considerable domestic demand, exports are an EXTENSION of domestic production nations with similar per capita will have overlapping demand structures and consume similar types of manufactured goods poor will trade with poor, rich with rich |
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intraindustry trade
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Hecksher-Ohlin/Ricardo explain INTERindustry trade. intraindustry trade is 2 way trade of a similar commodity, nations export and import goods in the same industry. WHY: transportation costs - (vancouver trade with seattle rather than toronto)seasonality, overlapping demands, differentiation of product
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tariff
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tax on imports
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protective tariff
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designed to insulate import-competing producers from foreign competition
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revenue tariff
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designed to generate tax revenue from either exports or imports
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specific tariff
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fixed amount added per unit of imported product
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ad valorem tariff
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percentage of the import value
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compound tariff
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combination of specific and ad valorem -- base duty + percentage
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customs valuation
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determine the value of import - complicated (price fluctuation)
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nominal tariff rate
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general idea of the level of protection for home industries, applied to the value of the final import product - not as accurate a measure as the effective tariff rate
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