CH 3 - The Political Economy Of International Trade Cooperation Flashcards
Production Possibility Frontier
- defines the limits of possible consumption
m = marginal rate of transformation
Consumption Indifference Curve
- explains the specific combination of computers and shirts and American consumers will purchase
Specialization
When a country has a comparative advantage on a good, thus specializes on its production while importing goods that are scarce or relatively costly to produce domestically
H-O model
Argues that comparative advantage arises from cross-national differences in factor endowments
Factor endowment
The amount of land, labor, and capital a country has available
Trade bargain
Governments exchange market access commitments
Contact curve
The set of mutually beneficial agreements that exhaust available joint gains
Patience
Both parties to the negotiation would prefer to settle today rather than tomorrow
Pareto suboptimal
When no single actor can be made better off without at the same time making another actor worse off
Nash equilibrium
An outcome at which neither player has an incentive to change strategies unilaterally
Tit-for-tat
When each government plays the strategy that its partner played in the previous round of the game
Dispute settlement mechanism
A quasi-judicial tribunal that is used to resolve trade disputes between WTO member governments
