AGB 302 Assessment Test Questions with Complete Answers

free trade - Answer- a situation in which a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country comparative advantage - Answer- the intellectual basis of modern argument for unrestricted free trade David Ricardo - Answer- comparative advantage Heckscher-Ohlin Theory - Answer- The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor. New trade theory - Answer- countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms Paul Krugman - Answer- New trade theory Micheal Porter - Answer- Theory of national competitive advantage Mercantillism - Answer- a country should sell more goods to another country than it buys zero-sum game - Answer- a situation in which an economic gain by one country results in an economic loss by another absolute advantage - Answer- the ability to produce a good using fewer inputs than another producer production possibilities frontier - Answer- the line on a production possibilities graph that shows the maximum possible output comparative advantage - Answer- potential world production is greater with unrestricted free trade than with restricted trade Constant Returns to Specialization - Answer- The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier.