Section 1 Review Flashcards
What is Opportunity Cost?
The highest-valued alternative that we must give up to get something.
What is Marginal Cost?
The opportunity cost of producing one more unit of a good or service.
When does a person have an Absolute Advantage?
An absolute advantage is achieved when a person is more productive then another person.
When does a person have a Competitive Advantage?
A competitive advantage is achieved when a person is able to perform an activity at a lower opportunity cost than anyone else.
What is Allocative Efficiency?
Allocative Efficiency is achieved when we are producing goods at the lowest possible cost and in the quantities that provide the greatest possible benefit. We cannot produce more of any good without giving up some of another good that we value more highly.
