Home
Flashcards
Preview
AP Econ Ch. 2 "Specialization and Comparative Advantage"
Home
Get App
Take Quiz
Create
Specialization/Division of Labor
Allowing people with different abilities to only do what they are relatively good at in order to enahnce productivity.
It permits people to develop expertise in the task(s) that they concentrate on--practice improves performance.
Absolute Advantage
When a country can produce a good using fewer resources per unit of output than another country.
Comparative Advantage
When a country can produce a good at a lower opportunity cost than another country.
Terms of Trade
Functions of an Economic System
What, how, and for whom to produce
Allocative Efficiency/Efficiency in Output (P = MC)
Requires that national output reflects the needs and wants of consumers.
Price = Marginal Cost
Productive Efficiency P = min ATC
Marginal Cost
The cost of producing one more unit.
Marginal Value
The value of one more unit.
Efficiency in Production/Technological Efficiency
Determining how much of each input to use in the production process.
wage/capital cost = w/r = MP
L
/MP
K
MP
K
/r = MP
L
/w
Wage
The price of labor.
Rent
Rental Rate
The price of capital.
Marginal Product of Labor (MP
L
)
The additional output produced by one more unit of labor.
Marginal Product of Capital (MP
K
)
The additional output produced by one more unit of capital.
Marginal Physical Product
The marginal product on an input.
Distributive Efficiency/Efficiency in Exchange
Requires that those who place the highest relative value on goods receive them.
Marginal Utility (MU)
The additional utility from the last unit.
Price (P)
How much a good costs.
Marginal Rate of Substitution (MRS)
The ratio of marginal utilities
MU
C
/MU
F
= marginal utility (clothing) / marginal utility (food)
Distributive efficiency
occurs when this is equal for every consumer.
Author
sa711kevin
ID
8412
Card Set
AP Econ Ch. 2 "Specialization and Comparative Advantage"
Description
AP Econ Ch. 2 "Specialization and Comparative Advantage"
Updated
2010-02-28T08:58:41Z
Show Answers
Home
Flashcards
Preview