Egb Midterm

Chapter 3 Comparative Advantage

* Absolute advantage: quantity

* Labor productivity: the number of units of output that a worker can produce in one hour.

* Opportunity cost: the amount of production of the other product that is given up.

* Principle of comparative advantage: a country will export the goods and services that it can produce at a low opportunity cost and import the goods and services that it would otherwise produce at a high opportunity cost.

* Relative price: the ratio of one product to another product price.

* Note:1) absolute advantage is also a case of comparative advantage. 2)A country will have a comparative advantage even if it has no absolute advantage.

题型：

1. Graph: x/y axis: two goods. 注明xx hours of production in each place

Steeper curve=do y-axis business; flatter curve=do x-axis business

2. Absolute advantage: 看数量。 Comparative advantage: 看价格比

3. Gain from complete specialization: 平分hours，算出每个国家可以做的each product, 用有comparative advantage-没有advantage的，差为gains (can be negative).

4. Opportunity cost

5. Terms of trade: between OC, included.

Chapter 4 Trade: Factor availability and Factor Proportions are Key

* Increasing marginal cost: As one industry expands at the expense of others, increasing amount of the other products must be given up to get each extra unit of the expanding industry’s product.

* Community indifference curve: How the economic well-being of a whole group depends on the whole group’s consumption of products.

* Terms of trade: the price the country receives from foreign buyers for its export product, relative to the price that the country pays foreign seller for its import products. (exporting product’s relative price)

* Trade implications: 1) within each country output expands for the product that the country exports. 2) The shift from no trade to free trade results in more efficient world production as each country expands output of the product in which it is...