Chapter 2

Question 1

Comparative Advantage

Answer 1

A person would have a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost that anyone else. [Involves comparing opportunity costs]

Question 2

Absolute Advantage

Answer 2

A person that is more productive than others would have an absolute advantage in that activity. [Involves comparing productivities & production per hour]

Question 3

Production Possibilities Frontier [PPF Graph]

Answer 3

The boundary between those combinations of goods and services that can be produced and those that cannot.

Question 4

Production Efficiency

Answer 4

Producing goods and services at the lowest opportunity costs.

Question 5

Opportunity Cost (of an action)

Answer 5

The highest-valued alternative forgone

Question 6

Marginal Cost

Answer 6

The marginal cost of a good is the opportunity cost of producing one more unit of it.