Econ 333 Ch.6
|differentiated goods||Most goods are not identical|
|imperfect competition||firms can influence the price they charge|
|Monopolistic competition||single producer of a good|
two key features:
-The goods produced by different firms are differentiated.
-Firms enjoy increasing returns to scale, by which we mean that the average costs for a firm fall as more output is produced.
assumes differentiated products, many firms, and increasing returns to scale. Firms enter whenever there are profits to be earned, so profits are zero in the long-run equilibrium.
|Intra-industry trade|| deals with imports and exports in the same industry.|
Minimum of imports and exports divided by the average of imports and exports
|gravity equation|| Prediction: Large countries (as measured by their GDP) should trade the most. |
The gravity equation states that countries with higher GDP, or that are close, will trade more. In addition, research has shown that there is more trade within countries than between countries.
|free-trade agreements||free trade occurs among a group of countries|
|border effects||Factors that make it easier or more difficult to trade goods between countries|