Ag Econ chapter 8

Gains from trade

the benefits that come from reallocating resources, goods, and services to better uses.

comparative advantage

the ability to do a task at a lower opportunity cost

absolute advantage

the ability to do a task using fewer inputs

oppurtunity cost of a task =

time task takes over time required to produce the alternative

what does specializes in a task do

ensures each task is being done at the lowest opp cost

what is the reason for international trade

gains from trade created by comparative advantage

what is a signal to potential suppliers and buyers about how much buyers value a good or how expensive it is for sellers to produce it

price

prediction markets

markets whose payoffs are linked to wheather an uncertain event occurs

internal markets

markets within a company to buy and sell scarce resources

knowledge problems

when knowledge needed to make a good decision is not available to the decision maker