Econ Assignment #2
A company can either produce 600 skateboards or 900 snowboards in one week. What is OC of making 900 snowboards?
600 skateboards
Helen gives up the opportunity to bake 40 cakes for each room she paints. Josh can paint one room for 60 cakes. The OC of a cake for josh is
painting 1/60 of a room
A production possibilities frontier will be bowed out if
resources are not perfectly adaptable to making each good.
Comparative advantage is
the ability of an individual to produce a good at a lower opportunity cost than other individuals can
When we look at a production possibilities curve, the opportunity cost can be understood as
the amount of the other good that must be given up for one more unit of production
The opportunity cost of a particular activity
varies from person to person
The opportunity cost of choosing a particular activity
varies, depending on time and circumstances
If Evan has an absolute advantage in cleaning and bookkeeping compared to Gloria then
we can conclude nothing about comparative advantage
Wealth is:
whatever people value
If one person has the absolute advantage in producing both of two goods then that person
will have comparative advantage in only one good
The law of comparative advantage says that
the individual with the lowest OC of producing a particular good should produce it
Joe can make 15 violins or 15 violas
the opportunity cost of producing 1 viola is 1 violin
What is most appropriately measured along one axis of the production possibilities frontier diagram
the quantity of a good produced
Eileen has comparative advantage over Janice in piano tuning but not in shoe polishing
Janice must have a lower opportunity cost of shoe polishing
If Jason can chop up more carrots per minute than Sara...
Jason has absolute advantage in carrot chopping
John washes a car in 75 minutes and a dog in 15 Maria washes a car in 40 minutes and a dog in 10
The opportunity cost of washing a dog is greater for Maria
A "free" good is
a good obtained without any sacrifice whatsoever
On a given production possibilities frontier, what is assumed to be fixed
amount of labor, capital, land and resources available and the level of technology
In a voluntary exchange
both parties tend to receive more in value than they give up
Any combo of two goods that lies beyond the production possibilities frontier is
currently impossible to produce
Wealth equaling material things is
false. Must be rejected
With a good on each axis, the production possibilities frontier is downward-sloping, which suggests
the production of one good ultimately means sacrificing production of the other.
The opportunity cost of an activity is
the value of the best alternative not chosen
