International economics Flashcards
comparative advantage
the ability of one economic entity to produce a G/S at a lower opportunity cost than another entity. It determines the economic benefit from international trade
what is comparative advantage determined by?
relative opportunity costs
Absolute advantage
exists when a country, business, individual, or entity can produce a G/S more efficiently than another entity. it uses fewer resources to produce a particular good or service than another entity.
Opportunity costs
the money value of benefits lost from the next best opportunity as the result of choosing another opportunity. if you choose to do one thing, the opp. cost is the value of the benefit lost by not doing another thing that would have provided the next best benefit.
Porter’s Four Attributes of National Advantage
Factor endowment
demand conditions
relating and supporting industries
firm strategy, structure, and rivalry
Porter’s Four Outcomes that give national advantage
Availability of resources and skills
infor used to determine which opp. to pursue with resources and skills
goals of individuals within entities
pressures on entities to innovate and invest.
Balance of Trade
difference between money value of imports and exports
Trade surplus
exports > imports
Trade deficit
imports > exports
Balance of payments
summary of accounting of US based transactions with all other countries during a period of time.
Balance of payment accounts
Current account
Capital account
Financial account
Capital Account
Measures the balance of payments for international investments and loans
Current Account
Measures the balance of payments for international trade and government grants
Net amounts earned from G/S
amounts spent on imports
gov grants to foreign entities.
Define a dumping price policy
Selling goods in another country at a price less than cost
Embargo
total ban on certain types of imports
