Chapter 2 Vocab - The Power of Trade and Comparative Advantage

Question 1

Define: Absolute advantage

Answer 1

The ability to produce the same good using fewer inputs than another producer

Question 2

Define: Comparative advantage

Answer 2

The ability to produce goods at a lower opportunity cost (giving up less)

Question 3

Define: Production possibilities frontier

Answer 3

A graph showing all the combinations of goods that a country can produce given its productivity and supply of inputs

Question 4

What is the relationship between the slope of a PPF and opportunity cost?

Answer 4

The slope is the same value as the opportunity cost

Question 5

What does specialization do to productivity? Why?

Answer 5

Specialization increases productivity because it increases knowledge