Chapter 7 Flashcards
the quality of producing effectively with a minimum of waste
efficiency
the total amount invested in the production of a good
input
the total amount of a good that is produced
output
two methods by which efficiency can be improved
- input steady– output increase
- constant output–input reduction
truly efficient producers turn out quality goods at
relatively low prices
creates the wealth of nations
intelligent work
the sum cost of all the factors pf production used in making goods
total cost
the sum cost of all the factors of production used in producing one unit of a good
average cost
Henry Ford borrowed ideas from other men combining them to form the “American system” of
mass production
three elements that mass production are based on:
- division of labor
- standardized parts
- automatic conveyance (assembly line)
when specialization is carried beyond the point of maximum efficiency, it becomes
overspecialization
(actual efficiency of production declines)
the ability of one entity to produce goods or provide services more efficiently than his competitors when given the same resources
absolute advantage
the ability of an entity to produce a good or provide a service at an opportunity cost that is lower than that of another producer
comparative advantage
(you may be bad overall, but you get the job you are better at of the options available)
the production of goods in which a country or region has absolute or comparative advantage
occurs when an area realizes that it is advantageous to produce different goods to exchange these products for those of other areas
geographic specialization
Advocate of the Principle of Comparative Advantage
David Ricardo
