TRADE BROWN Flashcards
1
Q
Gains from Trade
A
Static and Dynamic Gains
2
Q
Static gains from trade
A
improvements in allocative and productive efficiency
3
Q
dynamic gains
A
improvements in welfare that occur from improvements in product quality or greater choice
4
Q
Comparative advantage
A
Daniel Ricardo, 1817, comparative adv. exist when a country has a “margin of superiority” in the supply of a good of service eg. the marginal cost of production is lower
5
Q
why specialisation?
A
a country specializes to gain better allocative efficiency and welfare
6
Q
Free Trade System
A
Without trade barriers
7
Q
productivity gap
A
Difference between two countries output
8
Q
Critic on specialization
A
external costs (pollution), theory/reality (bold pout ppf), structural unemployment
9
Q
Key assumptions in comparative advantage
A
- Occupational mobility of factors of production
- Constant returns to scale
- No externalities from consumption or production
