ECON 1BB3 Chapter Notes - Chapter 3: Natural Monopoly, Comparative Advantage, Opportunity Cost

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Simplest unit on demand side of product market and supply side of resource market: vary in size. Utility: satisfaction gained from consuming goods and services. Have changed over time, used to be self sufficient. Way to organize production, take advantage of specialization, locate close to energy sources, and use larger machinery. Prevent collusion, regulate natural monopolies, provide public goods, control externalities. Households, firms, and governments in other countries. Trade because countries have different opportunity costs. Foreign exchange rate: price of one currency in terms of another o. Foreign exchange market: group of buyers and sellers trading currencies. Import quota: limits on quantity of imports. Restrictions are used to protect domestic industries. Opportunity cost measured in how much of other good must be given up. If both countries have absolute advantage in different good, each country also has the comparative advantage in that good.