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Econ 321 Exam 1 2023 # 25 questions and answers.
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Econ 321 Exam 1 2023 # 25 questions andanswers.
absolute advantage - -The principle that reflects the idea, popularized by Adam Smith
(1776), that countries should specialize in producing what they can produce more
cheaply and importing those things others produce more cheaply.
-aggregate indifference curves - -The set of indifference curves often used in general
equilibrium models to represent a population's tastes and preferences.
-capital intensive - -The description of an industry in the Heckscher-Ohlin model of
trade whose capital/labor ratio is relatively high compared to other industries
-comparative advantage - -The activity or activities for which the economy's
opportunity costs are the lowest and, therefore, the activities the economy should
specialize in and whose products it should export.
-consumer surplus - -The net gains for consumers of a product, equal to the sum of all
successive marginal gains minus the market price paid for the products.
-consumption possibilities lines - -The set of all combinations of products that
consumers can select from, given their real income and the relative prices of goods.
-demand side - -In macroeconomic modeling, this refers to the structure of aggregate
demand for the economy's production.
-economic problem - -The fundamental problem addressed by neoclassical economics,
namely that the economy has limited resources with which to satisfy unlimited wants.
-factor price equalization theorem - -The theorem predicts that, under a set of
assumptions that includes free trade, not only will the price of each of the final products
be equalized across countries, but the price of each factor of production will also be the
same in every country.
-general equilibrium model - -A model of trade consisting of a production possibilities
frontier and indifference curves.
-Heckscher-Ohlin (OH) model - -The general equilibrium model of trade consisting of
the production possibilities frontier and indifference curves, which was first developed
in the 1920s.
-Heckscher-Ohlin theorem - -In the case of two countries, two products, and two
factors, plus a large set of other simplifying assumptions, free trade will result in each
country exporting the product whose industry intensively uses the country's relatively
abundant factor.
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