Chapter 2 Reading pt.2 Flashcards
What is a “Production Possibilities Frontier (PPF)
It shows the combinations of two goods that are possible for a society to produce at full employment.
What is an Opportunity Cost
What you or the economy must give up to have more of a product or service
2,000 backpacks must be given up to obtain 3200 tablets, what is the opportunity cost of 1 tablet? How do you calculate it.
2,000/3,200 = 0.625
The opportunity cost of 1 tablet is 0.625 backpacks
Economic growth can be viewed as an _____ shift on the PPF
Outward
Economic growth has two basic determinants, what are they?
Expanding resources and improving technologies
What is an “investment in human capital”
improving workers skills to increase the labour factor on PPF
Why would a PPF shift outward?
As a result of an increase in resources
The goods we buy from other countries are called _____, while the goods we sell to other countries are called _______.
Imports ; Exports
When does an “Absolute advantage” occur
When one country can produce more of a good that another country using the same amount of resources
When does a country have a “comparative advantage” in producing a good
A country has a comparative advantage in producing a good if its opportunity cost is lower than another countries opportunity cost for that good
What does it mean when a country is in “Autarky”
It means they do not trade with other countries, they have a closed economy
