SOLUTIONS FOR INTERNATIONAL ECONOMICS, THEORY AND
POLICY 12TH EDITION KRUGMAN (ALL CHAPTERS INCLUDED)
Gravity Model -ANSWER-A model of comparative advantage that describes the level of
interaction between two places, based on the size of their populations and their distance
from each other.
Gross Domestic Product (GDP) -ANSWER-A measurement of the total goods and services
produced within a country.
developing countries -ANSWER-countries with less productive economies and a lower
quality of life
service offshoring (service outsourcing) -ANSWER-practice of hiring foreign workers or
contracting with an international third party service provider to run service based functions
of a particular industry
opportunity cost -ANSWER-Cost of the next best alternative use of money, time, or
resources when one choice is made rather than another
Ricardian Model -ANSWER-explains how the level of a country's technology affects the
wages paid to labor, such that countries with better technologies have higher wages
production possibilities curve -ANSWER-A curve that describes the maximum amount of one
good that can be produced for every possible level of production of the other good.
Production Possibilities Frontier (PPF) -ANSWER-a diagram that shows the productively
efficient combinations of two products that an economy can produce given the resources it
has available
,absolute advantage -ANSWER-the ability to produce more of a given product using a given
amount of resources
partial equilibrium analysis -ANSWER-the analysis of a single market in isolation, ignoring
any feedbacks that may come from induced changes in other markets
general equilibrium analysis -ANSWER-the analysis of all the economy's markets
simultaneously, recognizing the interactions among the various markets
relative demand -ANSWER-The ratio of the demand for one good to the demand for another
relative demand curve -ANSWER-The quantity demanded of one good divided by the
quantity demanded of another good; how many units are demanded of a good for each unit
demanded of another good
relative supply curve -ANSWER-the quantity supplied of one good divided by the quantity
supplied of another good; how many units are supplied of a good for each unit supplied of
another good
gains from trade -ANSWER-the extra output that trading partners obtain through
specialization of production and exchange of goods and services
Relative wages -ANSWER-the wages of the domestic country relative to the wages in the
foreign country
pauper labor argument -ANSWER-Foreign competition is unfair and hurts other countries
when it is based on low wages
Specialization -ANSWER-the concentration of the productive efforts of individuals and firms
on a limited number of activities
, derived demand -ANSWER-Business demand that ultimately comes from (derives from) the
demand for consumer goods.
nontraded goods -ANSWER-goods that are neither imported nor exported, for reasons like
high transportation costs. Domestic produced and consumed products.
unit labor requirement -ANSWER-indicates the constant number of hours of labor required
to produce one unit of output
Mobile Factors -ANSWER-Factors of production that can move between sectors. I.e., labor
specific factors -ANSWER-Factors of production that are unable to move into or out of an
industry or sector.
production function -ANSWER-the relationship between quantity of inputs used to make a
good and the quantity of output of that good
Marginal product of labor -ANSWER-the increase in the amount of output from an additional
unit of labor
diminishing returns -ANSWER-stage where output increases at a decreasing rate as more
units of variable input are added
budget constraint -ANSWER-all possible consumption combinations of goods that someone
can afford, given the prices of goods, when all income is spent; the boundary of the
opportunity set
labor mobility -ANSWER-the ability and willingness of workers to relocate in markets where
wages are higher
POLICY 12TH EDITION KRUGMAN (ALL CHAPTERS INCLUDED)
Gravity Model -ANSWER-A model of comparative advantage that describes the level of
interaction between two places, based on the size of their populations and their distance
from each other.
Gross Domestic Product (GDP) -ANSWER-A measurement of the total goods and services
produced within a country.
developing countries -ANSWER-countries with less productive economies and a lower
quality of life
service offshoring (service outsourcing) -ANSWER-practice of hiring foreign workers or
contracting with an international third party service provider to run service based functions
of a particular industry
opportunity cost -ANSWER-Cost of the next best alternative use of money, time, or
resources when one choice is made rather than another
Ricardian Model -ANSWER-explains how the level of a country's technology affects the
wages paid to labor, such that countries with better technologies have higher wages
production possibilities curve -ANSWER-A curve that describes the maximum amount of one
good that can be produced for every possible level of production of the other good.
Production Possibilities Frontier (PPF) -ANSWER-a diagram that shows the productively
efficient combinations of two products that an economy can produce given the resources it
has available
,absolute advantage -ANSWER-the ability to produce more of a given product using a given
amount of resources
partial equilibrium analysis -ANSWER-the analysis of a single market in isolation, ignoring
any feedbacks that may come from induced changes in other markets
general equilibrium analysis -ANSWER-the analysis of all the economy's markets
simultaneously, recognizing the interactions among the various markets
relative demand -ANSWER-The ratio of the demand for one good to the demand for another
relative demand curve -ANSWER-The quantity demanded of one good divided by the
quantity demanded of another good; how many units are demanded of a good for each unit
demanded of another good
relative supply curve -ANSWER-the quantity supplied of one good divided by the quantity
supplied of another good; how many units are supplied of a good for each unit supplied of
another good
gains from trade -ANSWER-the extra output that trading partners obtain through
specialization of production and exchange of goods and services
Relative wages -ANSWER-the wages of the domestic country relative to the wages in the
foreign country
pauper labor argument -ANSWER-Foreign competition is unfair and hurts other countries
when it is based on low wages
Specialization -ANSWER-the concentration of the productive efforts of individuals and firms
on a limited number of activities
, derived demand -ANSWER-Business demand that ultimately comes from (derives from) the
demand for consumer goods.
nontraded goods -ANSWER-goods that are neither imported nor exported, for reasons like
high transportation costs. Domestic produced and consumed products.
unit labor requirement -ANSWER-indicates the constant number of hours of labor required
to produce one unit of output
Mobile Factors -ANSWER-Factors of production that can move between sectors. I.e., labor
specific factors -ANSWER-Factors of production that are unable to move into or out of an
industry or sector.
production function -ANSWER-the relationship between quantity of inputs used to make a
good and the quantity of output of that good
Marginal product of labor -ANSWER-the increase in the amount of output from an additional
unit of labor
diminishing returns -ANSWER-stage where output increases at a decreasing rate as more
units of variable input are added
budget constraint -ANSWER-all possible consumption combinations of goods that someone
can afford, given the prices of goods, when all income is spent; the boundary of the
opportunity set
labor mobility -ANSWER-the ability and willingness of workers to relocate in markets where
wages are higher
