2-Economic Activities: Producing And Trading Flashcards
A straight-line PPF represents
The possible combinations of 2 goods that can be produced In a certain period of time, under the conditions of a given state of technology and fully employed resources.
It accounts for constant opportunity costs: increased production of one good comes at constant opportunity costs.
A bowed-outward (concave-downward) PPF represents
The possible combination of two goods that can be produced, in a certain period of time , under the conditions of a given state of technology and fully employed resources.
the law of increasing opportunity costs: increased production of one good comes at increased opportunity costs.
Law of increasing opportunity costs
As more of a good is produced, the opportunity costs of producing that good increase
Productive efficiency
The condition where the maximum output is produced with given resources and technology
Productive inefficiency
The condition where less than the maximum output is produced with given resources and technology.
Productive inefficiency implies that more of one good can be produced without any less of another good being produced.
Technology
The body of skills and knowledge concerning the use of resources in production. An advance in technology commonly refers to the ability to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources.
Production possibilities frontier
Represents the possible combinations of two goods that can be produced in a certain period of time under the conditions of a given state of technology and fully employed resources.
Exchange (Trade)
The process of giving up one thing for something else.
Ex Ante
Phrase that means “before” as in before a trade
Ex Post
Phrase that means “after” as in after a trade
Terms of Trade
How much of one thing is given up for how much of something else
Transaction costs
The costs associated with the time and effort needed to search out, negotiate and consummate an exchange.
Comparative advantage
The situation where someone can produce a good at lower opportunity cost than someone else can
Exchange (Trade)
The process of giving up one thing for something else.
Ex Ante
Phrase that means “before” as in before a trade
