chapter 2 terms Flashcards
Absolute advantage?
Fastest at performing task
Comparative advantage?
Lowest opportunity cost when performing task.
When two people have different opportunity costs of performing various task they cab increase the total value of available goods how?
By trading with each other
The United States has a comparative advantage in what?
In design of electronic computing hardware and software
Canada has a comparative advantage in what?
production of agricultural products.
Topography and climate explains why Colorado specializes in ____ and Hawaii specializes in ______
Colorado specializes in skiing and Hawaii specializes as an ocean resort.
Cultures that encourage entrepreneurship will tend to have the comparative advantage in what?
The introduction of new products
Cultures that promote high standards of care and craftmanship will tend to have a comparative advantage in what?
The production of high-quality variants of established products.
What happened to U.S. lead in the T.V and digital markets?
Shift from skilled workers to unskilled workers which U.S. a high wage country could not compete with low wage country
Production possibility curve?
Menu of possibilities between two activities; example combo of picking coffee and nuts
Opportunity cost in picking activity 2 is:
loss in activity 1/ gain in activity 2
Opportunity cost in picking 1 is:
loss in activity 2/ gain in activity 1
attainable points
Any point that lies either along the production possibility curve or within it
Unattainable points
Points that lie outside the production possibility curve. Meaning they can not produce with current resources.
Inefficient points
points that lie within the curve; existing resources would allow for production of more of atleast one good without sacrificing the production of any other good.
efficient point
one that lies along the production possibility curve; at any point more of one good can be produced only by producing less of the other
the difference in opportunity cost shows up as difference in what?
Slopes of production possibility curves.
How is the production possibility curve for an individual different than for a large group
- Individual is straight line PPC
- Group has a curved/bow PPC graph
What does a bow shap PPC mean?
That the opportunity cost of producing a product increases as the economy produces more of it.
Low hanging Fruit principle is what type of cost?
Principle of increasing Opportunity cost
What is the Principle of Increasing opportunity cost?
In expanding the production of any good, first employ those resources with lowest opportunity cost then only afterwards turn to resources with higher opportunity costs.
Factors that shift production possibility curve in the long run
- Increase in amount of productive resources
- Improvements in knowledge or technology that render existing resources more productive
What causes the quantity of productive resources to grow in an economy?
- Investment in new factories and equipment
- More and better equipment
Population growth causes an economy’s PCC curve to do what?
Shift outward and thus source of economic growth.
How does improvements of knowledge and technology effect PCC curve?
Shifts economic growth outward; usually directly or indirectly results of increases in education.
Is specialization always better?
No
Those who don’t specialize must do what?
Accept low wages or work extremely long hours.
