ECON-2006EG Study Guide - Quiz Guide: Absolute Advantage, Shortage, Deadweight Loss

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Economics chapter 8: trade: the production possibilities curve. 1. 1 calculating opportunity cost example websites and program: opportunity cost: what is given up to produce another unit of certain good. Opportunity cost (of producing one more website): loss in programs/gain in websites. Opportunity cost (of producing one more program): loss in webistes/gain in programs: calculation: using slope of two points. Oc (website): loss of 4 programs, gain of two websites: -4/2=-2 (absolute value is 2) For every production of one website, you give up being able to produce 2 programs. Oc (program): loss of 2 websites, gain of 4 programs: -2/4=-0. 5 (absolute value is 0. 5) For every production of one program, you give up being able to produce 0. 5 websites: comparative advantage. Comparative advantage: ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other producers: key to determine who has a comparative advantage is to compare individual opportunity costs.

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