ECON 1100 Chapter Notes - Chapter 2: Market Economy, Comparative Advantage, Opportunity Cost

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mauvecaribou445

7 Dec 2013

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Absolut advantage- the advantage of taking fewer hours to perform a task than another person does. Comparative advantage- the advantage of having a lower opportunity cost of performing a task than another person does for the same task. Productivity- units of output per hour divided by units of input per hour. The principle of comparative advantage- total output is largest when each person concentrates on the activates for which his or her opportunity cost is lowest. Production possibilities curve- a graph that describes the maximum amount of a good that can be produced for every possible level of production of the other good. Attainable point- any combination of goods that can be produced using currently available resources. Unattainable point- any combination of goods that cannot be produced using currently available resources. Inefficient point- any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of another.

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

byzantiumshark504

	Athletic Shoes (pairs)	Music CDs
United States	10,000	20,000
Great Britain	5,000	15,000

(Table: Production Possibilities for the U.S. and Great Britain) The table shows production possibilities for the United States and Great Britain, assuming that both countries could choose to devote all resources to producing either good. Which statement is correct with regard to the information in the table?

a. The U.S. has a comparative advantage in producing music CDs because it can produce more music CDs than anything else.

b. These countries should not engage in trade with one another, because the transportation costs of these goods are too high.

c. To determine which country has a comparative advantage in either good, we would need to know the monetary measure of production costs for both countries.

d. The U.S. has a comparative advantage in producing athletic shoes because it can do so at a lower opportunity cost.

silverminnow289

According to the theory of comparative advantage, a good should be produced where:

A. the production possibilities line lies further to the right than the trading possibilities line.
B. its cost is least in terms of alternative goods that might otherwise be produced.
C. its absolute cost in terms of real resources used is least.
D. its absolute money cost of production is least.

whitebear676

ECON 1100 Chapter Notes - Chapter 2: Market Economy, Comparative Advantage, Opportunity Cost

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