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ECN 204 Chapter 3: Chapter 3.docx

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taupewombat306
15 Mar 2012
School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Christos Shiamptanis

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Document Summary

Chapter 3: interdependence and the gain from trade. Benefit by specializing in what he/she does best and then trading with the other. Gains from trading less obvious when one person is better at producing every good. Production possibilities frontier shows the various mixes of output that ecn can produce. Tech allows to switch b/ one good to the other at constant rate. Production possibilities frontier is a straight line. Self-sufficient, rather than trade with each other, consumes exactly what he/she produces. Each of us can consume more w/out working any more hrs. Principle of comparative advantage who can produce at lowest cost. Absolute advantage comparing productivity of one person, firm, nation to another. Smaller quantity of inputs to product a good. Measure cost in terms of quantity of inputs. Possible for 1 person to have an absolute adv in both good. Opportunity cost what we give up to get that item: time spent takes away from time available.

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Related Questions

What is gained when people engage in specialization and trade?

A. Specialization and trade allow people to consume outside their individual production possibilities frontiers.

B. Specialization and trade allow people to consume at a point on their production possibilities frontiers.

C. Specialization and trade allow people to produce outside their individual production possibilities frontiers.

D. Specialization and trade allow people to consume inside their production possibilities frontiers.

E. There are no gains from specialization and trade.

1. Where can an economy not produce?

a. Inside its production possibilities frontier

b. On its production possibilities frontier.

c. Outside its production possibilities frontier.

d. At the endpoints of its production possibilities frontier.

 

2. When an economy is operating at a point on its production possibilities frontier, then

a. Consumers are content with the mix of goods and services that are being produced.

b. There is no way to produce more of one good without producing less of the other.

c. Equal amounts of the two goods are being produced.

d. All of the above are correct.

For a self-sufficient producer, the production possibilities frontier:
a. is the same as the consumption possibilities frontier.
b. is greater than the consumption possibilities frontier.
c. is less than the consumption possibilities frontier.
d. is always a straight line.