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Chapter 2

Chapter 2 Comparative Advantage

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Department
Economics
Course
ECON 1100
Professor
Eveline Adomait
Semester
Winter

Description
Chapter 2: Comparative Advantage Tuesday, January 8, 2013 7:23 PM 2.1 Exchange and Opportunity Cost Definitions 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 2.2 Comparative Advantage and Production Possibilities Definitions 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 Efficient Point- any combination of goods for which currently available resources do not allow an increase in the production of one good without a re
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