Econ ch 8 (.1,.2,.3)
Terms of trade are determined
on the basis of opportunity costs
A production possibilities curve (PPC)
shows the relationship between the maximum production of one good for a given level of production of another good.
comparative advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
define trade
the action of buying and selling goods and services.
explain the forces through which trade creates value
Because the value of goods is subjective, voluntary trade creates value
define specialization of labor
an industrial relations and human resources term that refers to the segmenting of large, labor-intensive tasks into workable sub-tasks that may be done by different workers or different groups of workers
state and describe the law of increasing marginal opportunity costs
as you increase the production of one good, the opportunity cost to produce another good decreases
On the Production Possibilities Curve, possible production levels are represented:
at any point on or below the curve.
compare and contrast an attainable and unattainable point
attainable = on or below the PPC unattainable= above the PPC
A linear PPC would show
constant opportunity costs
compare and contrast an efficient and inefficient point
efficient= on the line inefficient= below the line
Terms of trade is the
exchange rate of goods for goods.
California wine that is sold in New Jersey is an ________for California and an ___________for New Jersey.
export, import
You go to your doctor in Cincinnati, Ohio, and she takes an x-ray of your broken arm. The x-ray is read by a technician in Mumbai, India, and he sends a report via email to your doctor. The reading is an ___________ for India and an ___________for the United States.
export, import
absolute advantage
he ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
A construction company in China buys tractors from Caterpillar, which is based in Illinois. The tractors are an _________ for China and an ________ for Illinois.
import, export
You take a vacation in Paris, France. Your vacation is an _________ for the United States and an _________ for France.
import, export
a PPC that is curved away from the origin would show
increasing opportunity costs
terms of trade
the ratio at which a country can trade its exports for imports from other countries
If you produce at a point beyond your PPC, then you are producing at a point that is
unattainable
