Chapter 3 Flashcards
What is absolute advantage
the ability to produce more goods of a certain type than another economy, assuming both are using all resources towards the one type of good
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
consume a combination of goods that lies outside its own production possibilities frontier
Joe can mow a lawn in two hours or he can trim a tree in one hour. Forty can mow a lawn in three hours or he can trim a tree in two hours. What is Joe’s opportunity cost of mowing a lawn? (I.e. in the time it takes Joe to mow a lawn, how many trees could he have trimmed?)
2 trees
Joe can mow a lawn in two hours or he can trim a tree in one hour. Forty can mow a lawn in three hours or he can trim a tree in two hours. What is Joe’s opportunity cost of trimming a tree? (I.e. in the amount of time it takes Joe to trim a tree, how many lawns could he have mowed in that same amount of time?)
1/2 of a lawn
Joe can mow a lawn in two hours or he can trim a tree in one hour. Forty can mow a lawn in three hours or he can trim a tree in two hours. What is Forty’s opportunity cost of mowing a lawn? (I.e. in the amount of time it takes Forty to mow a lawn, how many trees could he have trimmed in that same amount of time?)
1.5 trees (or 3/2 trees)
Joe can mow a lawn in two hours or he can trim a tree in one hour. Forty can mow a lawn in three hours or he can trim a tree in two hours. Which of the following is true?
Joe has the absolute advantage in mowing lawns.
Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could
benefit Regan, but not Jayson.
A production possibilities frontier is a straight line when
the rate of tradeoff between the two goods being produced is constant.
