Microeconomics Flashcards
1
Q
What is the basic economic problem and what are the 3 key economic questions?
A
- Human wants are unlimited but the means to satisfy those wants are limited (relative scarcity)
- what to produce?
- how to produce?
- for whom to produce?
2
Q
What is the opportunity cost?
A
The opportunity cost of an action reflects the value of resources used in taking that action in their next best
alternative use.
3
Q
What is absolute advantage?
A
It is when one party can produce both tasks/objectives with a smaller quantity of inputs (time) than the other party.
4
Q
What is comparative advantage?
A
One party has a comparative advantage when their opportunity cost is lower in comparison to the other party.
