ECON Jan 22 - ECON Jan 22 2007 Trade Exchange rates Farmer...

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ECON Jan. 22, 2007 Trade Exchange rates Farmer Rancher 1M: 4P (wants m must give up 4 p) 1M: 2P (Rancher has the comparative advantage) 1M: 3P (Farmer is going to import meat and rancher is going to export meat) -Exchange rate has to fall somewhere in between the relative opportunity costs Exchange Rates 1- relative opportunity costs of production between the two 2- bargaining power (skill) Trade and Specialization -Trade allows for specialization Chapter 4: Supply and Demand 1- Perfect Competition: the most competition you can have -Many buyers and sellers -Price takers: so many buyers that are looking for great deals -Farming (soy, milk, wheat) -homogenous (the same) 2- Monopoly: mono-one poly-many (only one seller and many buyers) -unique product 3- Oligopoly -few firms -many buyers -homogenous (oil) -heterogeneous (AMD & Intel) 4- Monopolistic Competition -blend between perfect competition and monopoly -many buyers and many sellers -products are slightly differentiated (olig. towards the monopoly end) EX: Restaurants, sodas
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