Econ Exam I- Chapter 2

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PPF:

curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
all points on the frontier or inside are

attainable
combinations on the frontier are

efficient
combinations inside the frontier are

inefficient
points beyond the frontier are

unattainable
as the economy moves down the PPF it experiences

increasing marginal opportunity
the idea of increasing marginal opportunity cost illustrates that the

more resources already devoted to an activity, the smaller payoff to devoting additional resources to that activity
economic growth:

the ability of the economy to increase the production of goods and services
trade:

the act of buying and selling
benefit of trade:

people become better off by increasing both production and consumption
absolute advantage:

ability of an individual, firm, or country to produce more of a good or service than competitors using the same amt of resources
comparitive advantage:

the ability to produce a good or service at a lower opportunity cost than competitors
the basis for trade is

comparative advantage
households are

suppliers of factors of production-like labor---make goods or services
firms are

suppliers of goods and services --buy factors of production
free market:

few government restrictions on how a G or S can be produced or sold
the father of modern econ:

adam smith
comparatve advantage is the determinant

of exports and imports in ideal markets
absolute advantage is important for

productivity differences and real income across countries

Author

cthuruth

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Econ Exam I- Chapter 2

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macro

Updated

2010-09-15T00:58:14Z