Econ Ch. 2

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An economy is said to have a comparative advantage in the production of a good if it can produce that good...

at lower opportunity cost than another economy

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the revenant range, then its production possibility frontier has a...

constant and negative slope

The simplest circular-flow model shows the interaction between households and firms. In this model:

firms supply good and services to households; households in turn, supply factors of production to firms.

If Poland decides to increase the production of steel-- and decrease the production of vodka-- the production possibility frontier would suggest that there will be an _____ opportunity cost of producing more steel.

increasing

The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of...

increasing opportunity cost

As long as people have different ____, everyone has a comparative advantage in something.

opportunity cost

Free trade between countries...

will allow for greater levels of consumption than without trade.


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