midterm1 Flashcards
Why is the shape of the PPF often curved instead of straight?
Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for
True or False: When two countries choose to partake in international trade, it is mutually beneficial activity for both countries
True
True or False: Wealthier countries always beenfit more from international trade than poorer countiries
False
True or False: Countries trade for goods in which they do not have a comparative advantage, and therefore would never trade with nations that have similar resource endowments
false
True or False: Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond the origical product possibilities frontier
true
Comparative advantage is
The abilitiy to produce a good or service at a lower opportunity cost than another
When trading with more developed countries
Less developed countries have a comparative advanatage in the production of some goods or services
T or F: The process of specialization and trade has positive net benefits and is, therefore beneficial to everyone
False
A nation will not have a comparative advanatage in a product if it does not also have an absolute advantage in the production of that good
False
It can be mutually beneficiial for two nations to specialize in goods for which they have a comparative advantage of trafe with one another t or f
True
Countries specialize in the production of goods for which they have a comparative advantage
true
Absolute advantage is the source of the potential gains from specialisation and trade t or f
false
Barter is
An economic transaction in which one party trades a good or service for another good or service
Productive effciency concerns
the goods and services an economy produces
Allocative eddciency shows the
allocation of resources among the goods and services the members of economy prefer
