BEC Economic Theory review 13
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What is Debt Financing?
when taxes do not cover expenditures governments borrow. Debt holders differ from taxpayers in that their participation cannot be mandated.
What is absolute advantage for a good?
absolute advantage for a good exist when the cost of producing that good in one country is less than the cost of producing that good in another country.
What is comparative advantage for a good?
comparative advantage for a good exists when the opportunity cost of producing that good is less than the cost of producing other goods in the same country, compared to another country.
What is a factor endowment for a good?
regional differences in efficiency occur because of difference in supply of production factors, land, labor and capital.
What is specialization in terms of production of a good?
production factors and efficiency determine which goods countries will export and import. countries tend to export goods in which they have comparative advantages and import goods in which they have comparative disadvantages.
What is the first mover theory in terms of production of a good?
the first mover theory is that entities that first enter a market will dominate it, as latecomers will not be able to capture market share away from the standard setting pioneers who are able to achieve economies of scale most readily.
what is the effect of trade barriers?
the effect of trade barriers is to keep resources in less efficient protected industries rather than move the resources to relatively efficient industries.
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