Mod 4 Flashcards
OUTPUT
Over
of …. produced per day is an ….
OUTPUT
of hours needed to produce something is an ….
INPUT
of workers is an ……..
INPUT
INPUT
other
Which one has the comparative advantage?
the one with the least opportunity cost
Law of increasing opportunity cost
is a curved line
PPC
linear, constant opportunity cost
trade
one provides goods and services to others and receives goods and services in exchange
–> with trade people can gain more of what they want than they could from being self-sufficient
specialization
inc. output due to trade: each person specializes in the task they are good at preforming
what is the basis for mutual gains?
comparative advantage
Mutual gains
both countries are benefiting from specialization and trade
comparative advantage
when the opportunity cost of producing the good or service is lower for that individual than for others
* as long as trading partners have different opportunity costs, each has a comparative advantage in something and a comparative disadvantage in something else, so each can benefit from trade
absolute advantage
when an individual can make more of a good or service with a given amount of time and resources
terms of trade
rate at which one good can be exchanged for another
*any price per coconut between the opportunity cost of the coconut producer and the opportunity cost of the coconut buyer will make both sides better off than in the absence of trade
