chapter 3

Question 1

what is a production possibility frontier

Answer 1

shows the various
mixes of output that an economy can produce.

Question 2

absolute advantage?

Answer 2

The comparison among producers
of a good according to their productivity.

Question 3

comparative advantage?

Answer 3

The comparison among
producers of a good according to their opportunity
cost
rather than looking at inputs required we can look at opportunity cost to facilitate trade and specialization.

Question 4

what are the gains based on specialization and trade

Answer 4

they are based on comparative advantage,

Question 5

what is the benefit of a person specalizing?

Answer 5

when they have a comparative advantage, they can improve the production and the economy will rise.

Question 6

how does one benefit from trade?

Answer 6

they can obtain a good at a lower price than their opportunity cost.

Question 7

main take away from comparative advantage?

Answer 7

Trade can benefit everyone in society because it
allows people to specialize in activities in which
they have a comparative advantage.