Microeconomics Chapter 2 Comparative Advantage

a person has an absolute advantage over another person if they can perform a given task in less time or with fewer resources than the other person can

a person has a comparative advantage if their opportunity cost to perform a given task is lower than the opportunity cost of the other person

everyone can be made better for when each person/country concentrates on the activities for which their opportunity cost is the lowest; reason for specialization and trade

shows the maximum amount that can be produced of one good for every possible level of production of the other good

equals the opportunity cost of good 1 (good on the x-axis) and the reciprocal of the opportunity cost of good 2 (the good on the y-axis); tells how much of good 2 would have to be given up to produce 1 more unity of good 1

when 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; explains the PPC shape; go for the low hanging fruit first then gradually make your way up to picking the higher fruit