WGU C211 Global Economics for Managers

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208 term Sky Absolute AdvantageThe economic advantage one nation enjoys that is absolutely superior to other nations.Accounting ProfitTotal revenue minus total explicit cost Acquisitiona wholly owned subsidiary is created through direct foreign investment.Administrative PolicyBureaucratic rules that make it harder to import foreign goods.AgglomerationClustering of economic activities in certain locations. Beyond geographic advantages, location-specific advantages also arise from the clustering of economic activities in certain locations.Antidumping DutyTariffs levied on imports that have been "dumped" (selling below costs to "unfairly" drive domestic firms out of business).Antidumping LawLaw that makes it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating local rivals.Antitrust LawLaw that outlaws cartels (trusts).Antitrust PolicyGovernment policy designed to combat monopolies and cartels.AttackAn initial set of actions to gain competitive advantage.Automatic Stabilizerschanges in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action

Average fixed costFixed cost divided by the quantity of output AFC = FC/Q Average Revenuetotal revenue divided by the quantity sold Average total costTotal cost divided by the quantity of output

ATC = TC / Q

Average variable costVariable cost divided by the quantity of output AVC = VC/Q Balance of paymentsa country's international transaction statement.Balance of TradeThe aggregation of importing and exporting that leads to the country-level trade surplus or deficit.Bandwagon effectthe result of investors moving as a herd in the same direction at the same time. ٭ Bank Capitalthe resources a bank's owners have put into the institution Bargaining PowerAbility to extract favorable outcome from negotiations due to one party's strengths.Base of the PyramidEconomies where people make less than $2,000 per capita per year.Beijing ConsensusA view that questions Washington Consensus' belief in the superiority of private ownership over state ownership in economic policy making, which is often associated with the position held by the Chinese government.Bid ratethe price offered to buy a currency.Blue Ocean StrategyStrategy that focuses on developing new markets ("blue ocean") and avoids attacking core markets defended by rivals, which is likely to result in a bloody price war or a "red ocean." Bounded RationalityThe necessity of making rational decisions in the absence of complete information.Bretton Woods systema system in which all currencies were pegged at a fixed rate to the U.S. dollar.BRICBrazil, Russia, India, and China.Budget Constraintthe limit on the consumption bundles that a consumer can afford Build-operate-transfer (BOT) agreementa non-equity mode of entry used to build a longer-term presence.Capacity to PunishSufficient resources possessed by a price leader to deter and combat defection.Capital flighta phenomenon in which a large number of individuals and companies exchange domestic currencies for a foreign currency. ٭

Capital Requirementa government regulation specifying a minimum amount of bank capital Cartel (trust)An output- and price-fixing entity involving multiple competitors.Central Bankan institution designed to oversee the banking system and regulate the quantity of money in the economy Civil LawA legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments. It is "the oldest, the most influential, and the most widely distributed around the world." ٭ Classical Trade TheoriesThe major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2) absolute advantage, and (3) comparative advantage. (static) ٭ Clean (or free) floata pure market solution to determine exchange rates. ٭ Cognitive PillarThe internalized (or taken-for granted) values and beliefs that guide individual and firm behavior. ٭ CollusionCollective attempts between competing firms to reduce competition. An agreement among firms in a market about quantities to produce or prices to charge Collusive Price SettingPrice setting by monopolists or collusion parties at a level higher than the competitive level.Co-marketingrefers to efforts among a number of firms to jointly market their products and services.Command EconomyAn economy that is characterized by government ownership and control of factors of production. All factors of production should be government-owned or state-owned, and all supply, demand, and pricing are planned by the government.٭ Commodity Wealthmoney that takes the form of a commodity with intrinsic value Common LawA legal tradition that is shaped by precedents and traditions from previous judicial decisions. ٭ Comparative AdvantageRelative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations. (produce at a lower relative opportunity cost) ٭ Competition PolicyGovernment policy governing the rules of the game in competition.Competitive DynamicsActions and responses undertaken by competing firms.Competitive Marketsa market with many buyers and sellers trading identical products so that each buyer and seller is a price taker ٭

Competitor AnalysisThe process of anticipating rivals' actions in order to both revise a firm's plan and prepare to deal with rivals' response.Concentration RatioThe percentage of total industry sales accounted for by the top four, eight, or twenty firms.Constant Returns to ScaleThe property whereby long-run average total cost stays the same as the quantity of output changes Consumer Surplusthe amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it (the area under the demand curve and above the price.) Consumptionspending by households on goods and services, with the exception of purchases of new housing ٭ ContenderStrategy that centers on a firm engaging in rapid learning and then expanding overseas. ٭ CopyrightExclusive legal right of authors and publishers to publish and disseminate their work.Costthe value of everything a seller must give up to produce a good CounterattackA set of actions in response to attack.Country-of-origin effectThe positive or negative perception of firms and products from a certain country.Cross-market RetaliationRetaliatory attacks on a competitor's other markets if this competitor attacks a firm's original market.Crowding-Out Effectthe offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending Cultural distancethe difference between two cultures along some identifiable dimensions.Currencythe paper bills and coins in the hands of the public Currency boarda monetary authority that issues notes and coins convertible into a key foreign currency at a fixed exchange rate.Currency hedginga transaction that protects traders and investors from exposure to the fluctuations of the spot rate. ٭ Currency risksthe fluctuations of the foreign exchange market.Currency swapa foreign exchange transaction in which one currency is converted into another in Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future.