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Economics- Chpater 3 Review

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Department
Economics
Course
EC120
Professor
Ken Jackson
Semester
Fall

Description
Economics: Chapter 3 Review Key Terms Absolute Advantage – the comparison among producers of a good according to their productivity Opportunity Cost – whatever must be given up to obtain some item Comparative Advantage – the comparison among producers of a good according to their opportunity cost Imports – goods and services produced abroad and sold domestically (goods/services brought into the country) Exports – goods and services produced domestically and sold abroad (goods/sevices that leave the country) Summary - Interdependence is possible because people trade with one another - Trade can make everyone better off Meat per Kg Potatoes per Kg Meat in 8 H Potatoes in 8H Farmer 60 min/kg 15min/kg 8kg 32kg Rancher 20 min/kh 10min/kg 24kg 48kg - If the farmer decides to devote all 8 Hours of his time to making potatoes he will make 32kg of potatoes and no meat, if he devotes his time to meat he can make 8kg of meat and no potatoes - If the farmer divides his time equally he can make 16kg of potatoes and 4kg of meat - If the farmer spends 1 hour less of his output producing meat he loses 1kg of meat and gains 4kg of potatoes - The proposed trade-off between the farmer and rancher goes as follows  Farmer works 8 hours producing only potatoes, 32kg  Farmer gives 15kg of those potatoes and keeps 17kg of potatoes  Rancher produces 18kg of meat and 12kg of potatoes  Rancher gives Farmer 5kg of meat  No
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