Chapter 2 Review

Question 1

Allocative efficiency

Answer 1

Mix of goods that society most desires and when firms are producing optimal quantity of each output

Question 2

Budget constraints

Answer 2

The possible consumption combinations of goods that someone can afford , given prices of goods and when all income is spent

Question 3

Comparative advantage

Answer 3

A country can produce a good at a lower opportunity cost in terms of other goods or when a country has lower opportunity cost.