Ch. 8 - Gains from Trade Flashcards
1
Q
What are Gains from Trade?
A
The benefits that come from reallocating resources, goods, & services for better use
2
Q
What is an Absolute Advantage? What is a Comparative Advantage?
A
Absolute Advantage - The ability to do a task user fewer inputs
Comparative Advantage - The ability to do a task at a lower opportunity cost
Specialization is focusing on a specific task
Use comparative advantage to assign workers tasks
3
Q
What are the 3 Central Roles of Prices?
A
- A price is a signal
- A price is an incentive
- A price aggregates information
4
Q
What is Specialization?
A
Focusing on specific tasks
5
Q
What is an internal market?
A
Markets within a company to buy and sell scarce resources
6
Q
What is a knowledge problem?
A
When knowledge is needed to make a good decision is not avalible to the decision maker
