International Trade-Political Economy of Trade

Front

What is the definition of accounting profit?

Back

Accounting profit is the difference between total revenue and total explicit costs incurred in the production of goods or services.

Front

What is opportunity cost?

Back

Opportunity cost is the value of the next best alternative that is forgone when making a decision.

Front

What does comparative advantage mean?

Back

Comparative advantage refers to the ability of a party to produce a good or service at a lower opportunity cost than another party.

Front

What is a Production Possibility Frontier (PPF)?

Back

A PPF is a curve that illustrates the maximum feasible amount of two goods that a country can produce with available resources and technology.

Front

What does it mean for a market to be competitive?

Back

A competitive market is characterized by many buyers and sellers, where no single buyer or seller can influence the market price.

Front

What is the relationship between marginal cost and marginal revenue in a competitive market?

Back

In a competitive market, firms maximize profit by producing where marginal cost equals marginal revenue.

Front

What happens to firms in a competitive market when there are positive economic profits?

Back

Firms will enter the market in response to positive economic profits, increasing supply until profits are driven to zero.

Front

What is the significance of a closed economy in relation to the PPF?

Back

In a closed economy, the PPF reflects the entire economy's production capabilities without trade with other countries.

Front

What does the PPF indicate about efficient production?

Back

The PPF shows the maximum output combinations of two goods that can be produced efficiently, indicating trade-offs.

Front

What is absolute advantage?

Back

Absolute advantage is the ability of an entity to produce more of a good or service with the same amount of resources than another entity.