chapter 2 terms

Question 1

Absolute advantage?

Answer 1

Fastest at performing task

Question 2

Comparative advantage?

Answer 2

Lowest opportunity cost when performing task.

Question 3

When two people have different opportunity costs of performing various task they cab increase the total value of available goods how?

Answer 3

By trading with each other

Question 4

The United States has a comparative advantage in what?

Answer 4

In design of electronic computing hardware and software

Question 5

Canada has a comparative advantage in what?

Answer 5

production of agricultural products.

Question 6

Topography and climate explains why Colorado specializes in ____ and Hawaii specializes in ______

Answer 6

Colorado specializes in skiing and Hawaii specializes as an ocean resort.

Question 7

Cultures that encourage entrepreneurship will tend to have the comparative advantage in what?

Answer 7

The introduction of new products

Question 8

Cultures that promote high standards of care and craftmanship will tend to have a comparative advantage in what?

Answer 8

The production of high-quality variants of established products.

Question 9

What happened to U.S. lead in the T.V and digital markets?

Answer 9

Shift from skilled workers to unskilled workers which U.S. a high wage country could not compete with low wage country

Question 10

Production possibility curve?

Answer 10

Menu of possibilities between two activities; example combo of picking coffee and nuts

Question 11

Opportunity cost in picking activity 2 is:

Answer 11

loss in activity 1/ gain in activity 2

Question 12

Opportunity cost in picking 1 is:

Answer 12

loss in activity 2/ gain in activity 1

Question 13

attainable points

Answer 13

Any point that lies either along the production possibility curve or within it

Question 14

Unattainable points

Answer 14

Points that lie outside the production possibility curve. Meaning they can not produce with current resources.

Question 15

Inefficient points

Answer 15

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.

Question 16

efficient point

Answer 16

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

Question 17

the difference in opportunity cost shows up as difference in what?

Answer 17

Slopes of production possibility curves.

Question 18

How is the production possibility curve for an individual different than for a large group

Answer 18

• Individual is straight line PPC

- Group has a curved/bow PPC graph

Question 19

What does a bow shap PPC mean?

Answer 19

That the opportunity cost of producing a product increases as the economy produces more of it.

Question 20

Low hanging Fruit principle is what type of cost?

Answer 20

Principle of increasing Opportunity cost

Question 21

What is the Principle of Increasing opportunity cost?

Answer 21

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.

Question 22

Factors that shift production possibility curve in the long run

Answer 22

• Increase in amount of productive resources

- Improvements in knowledge or technology that render existing resources more productive

Question 23

What causes the quantity of productive resources to grow in an economy?

Answer 23

• Investment in new factories and equipment

- More and better equipment

Question 24

Population growth causes an economy’s PCC curve to do what?

Answer 24

Shift outward and thus source of economic growth.

Question 25

How does improvements of knowledge and technology effect PCC curve?

Answer 25

Shifts economic growth outward; usually directly or indirectly results of increases in education.

Question 26

Is specialization always better?

Answer 26

No

Question 27

Those who don’t specialize must do what?

Answer 27

Accept low wages or work extremely long hours.