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ECON 200 Lecture 5: Econ 200,University of Arizona,Readings-Notes(p5)

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ivorysea-lion839
30 Aug 2018
School
University of Arizona
Department
Economics
Course
ECON 200
Professor
ALL

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ECON 200 Full Course Notes
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Document Summary

A production possibilities frontier shows the various mixes of output that an economy can produce. The ppf in this case are straight due to the constant rate at which the producers can switch between the two products. Trade allows each of us to specialize in doing what we do best. Absolute advantage - the ability to produce a good using fewer inputs than another producer. Comparative advantage - the ability to produce a good at a lower opportunity cost than another producer. The producer who gives up less of other goods to produce good x has the smaller opportunity cost of producing good x and is said to have a comparative advantage in producing it. To what you do best and but the rest. Opportunity cost of one good is the inverse of the opportunity cost of the other.

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Related Questions

1. The law of comparative advantage says that:

A. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good.

B. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good

C. the individual with the lowest opportunity cost of producing a particular good should produce it

D. comparative advantage exists only when one person has an absolute advantage in the production of two goods

2. A country has an absolute advantage in the production of a good if that country:

A. can produce good using fewer resources than another country would require

B. has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

C. has the greatest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

D. has the lowest opportunity cost of producing the good and can produce it with the fewest resources

3. A production possibilities frontier can shift outward for all of the following reasons except:

A. a larger workforce

B. a decrease in the size of the labor force

C. an increase in the skills of the labor force

D. an improvement in technology

The law of comparative advantage states that:

a. each country should specialize in producing the good with the lowest opportunity cost.

b. a country that is able to produce something using fewer resources than other countries would gain from specialization and trade.

c. international trade barriers slow the introduction of new goods and better technologies.

d. countries can gain from trade if production is subject to economies of scale.

e. countries must agree on how much of one good exchanges for another.

An economy is said to have a comparative advantage in the production of one good if it:

a) can produce more of all goods than another economy.

b) can produce less of all goods than another economy.

c) has the lowest opportunity cost for producing a particular good.

d) has the highest opportunity cost for producing a particular good.