Unit 1 Quiz 3 Flashcards
Absolute Advantage
When a business or individual can produce more of a good or producer that has the same quantity of resources
Comparative Advantage
The ability to produce a good or service at a lower opportunity cost than the other producer
Specialization
Focusing production on select goods to increase efficiency
Division of labor
Asigning different, specific tasks to workers
Gains from Trade
When 2 countries speacilize in commodities in whixh they have a comparative advantage and exchange, benfit from increased consumption
Mutually beneficial trade
When countries have a rate of exchange that is profitable for both countries.
Coost-Benefit Analysis
Method that helps determine which expenses or sacrifices as well as benefits that are most likely to arise from a decision
Rational Agents
Someone who uses logic to make decisions based on common sense and a desire to maximize available resources
Explicit Opportunity Costs
Costs that require you to spend money
Implicit Opportunity Costs
One that an individual or business gives up in order to use a resource that it already has or is usinh
Utility
The total enjoyment or satisfaction consumer recieve from the goods or servives they consume
Total benefits
The amount of atisfaction prople recieve from all the goods and services they use
Total costs
The time, effort, and expense they spend to obtain the goods and servives
Total net benefits
The difference between total benefits and total costs
Optimal choice
The level at which you recieve the greatest benefir for the least cost
Marginal benefits
The additional benefit you gain from producing each inidividual unit
Marginal costs
How much more you would have to spend to produce those additional units
Consumer choice theory
Set of priciple that tries to explain why people buy some goods or services
Diminishing marginal utility
Each additional unit of consumption provides less usefulness to a consumer that the previous unit of consumption
Marginal utility
Additional amount of usefulness that someone gets from one extra unit of a good or service
Marginal analysis
Used to figure out the balance between marginal benefits and marginal costs
Optimal quantity
Purchasing the amount of output where marginal benefits equal marginal costs
Sunk costs
What they have spent in the past on that good or service
Utility maximization rule
Economists weigh the marginal utility pper dollar spent on each unit of product for each consumer
