question
Absolute advantage
answer
the ability to produce more of a given product using a given amount of resources
ex:
an attorney can write his will in two hours, half the time it takes other attorneys to write a will, he has an absolute advantage
ex:
an attorney can write his will in two hours, half the time it takes other attorneys to write a will, he has an absolute advantage
question
comparative advantage
answer
the ability to produce a good at a lower opportunity cost than another producer
ex: an attorney can do his own will 2x faster than other attorneys but by sacrificing time at work his opportunity cost is thousands of dollars. The attorney should have just hired another attorney to do the will and it would have cost him under $1000.
ex: an attorney can do his own will 2x faster than other attorneys but by sacrificing time at work his opportunity cost is thousands of dollars. The attorney should have just hired another attorney to do the will and it would have cost him under $1000.
question
principle of comparative advantage
answer
Everyone does best when each person (or each country) concentrates on the activities for which his or her opportunity cost is lowest
question
production possibilities curve
answer
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
question
attainable points on PPF
answer
any combination of goods that can be produced using currently available resources
ex: points A,B,C,X are attainable because they are inside the line
ex: points A,B,C,X are attainable because they are inside the line
question
Unattainable Points on PPF
answer
any combination of good that cannot be produced using the currently available resources.
points outside the PPF like point y in the picture
points outside the PPF like point y in the picture
question
Inefficient points on the PPF
answer
when you are able to produce more of one good without sacrificing of the other good and you are not.
point X would be an inefficient point.
point X would be an inefficient point.
question
efficient points on PPF
answer
combination of goods where you cannot produce more of one good without sacrificing the other good. basically reaching the maximum.
points A,B,C are efficient points. they are on the line
points A,B,C are efficient points. they are on the line
question
When Susan uses 24 pounds of coffee per day she also uses 12 pounds if nuts per day. What would be her opportunity cost for one pound of nuts? and one pound of coffee?
answer
for every 2 pounds of coffee she uses 1 pound of nuts. So, if she uses an additional pound of nuts her OC would be 2 pounds of coffee. Her OC for an additional pound of coffee would be 1/2 a pound of nuts.
question
Principle of Increasing Opportunity Cost
answer
(AKA Low-Hanging-Fruit Principle): In expanding the production of any good, first employ those resources with the lowest opportunity cost, and only afterward turn to resources with higher opportunity costs
question
outward shift of PPF =
answer
economic growth.
This can result from increase in available productive resources, or improvement in technology or knowledge that makes existing resources more productive.
This can result from increase in available productive resources, or improvement in technology or knowledge that makes existing resources more productive.
question
According to the textbook, the evidence indicates that NAFTA has:
A. reduced the wages of skilled workers in the United States.
B. reduced the employment of unskilled workers in the United States significantly.
C. stopped illegal immigration from Mexico.
D. not significantly reduced the employment of unskilled workers in the United States
A. reduced the wages of skilled workers in the United States.
B. reduced the employment of unskilled workers in the United States significantly.
C. stopped illegal immigration from Mexico.
D. not significantly reduced the employment of unskilled workers in the United States
answer
not significantly reduced the employment of unskilled workers in the United States
question
According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the
production of goods made by unskilled labor?
A. Canada
B. Cuba
C. Mexico
D. The U.S.A
production of goods made by unskilled labor?
A. Canada
B. Cuba
C. Mexico
D. The U.S.A
answer
Mexico
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