Unit two study guide; study guide
For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to have what?
impossible for them to have comparative advantage in both activities
the european union is significant because of what
in order to join you must have hight human rights; europe historically has been a divided continent; it created the largest economy on the world
define interdependent
where we rely upon each other for goods and services we all consume
The "Big Mac Index" is one method of determining
Purchasing Power Parity for a nation's currency.
Adam Smith asserted that a person should never attempt to make at home...
(What it will cost him more to make than to buy.)
what happens to a country without trade
a countries PPF is also its consumption possibility frontier
the gains from trade are what
a result of more efficient recourse allocation
trade can make everyone better off because of what?
allows people tro specialize according to comparative advantage
Trade between countries allows them to do / have what?
allows them to consume at a point outside of their production possibility frontier
Total output in an economy increases when each person specializes because why?
because each person spends more time producing the product in which they have a comparative advantage
specialization and trade are closely linked to
because of comparative advantage
The fact that economists are generally united in their support of free trade is traceable to
david recardo and adam smith
The principle of comparative advantage as we know it today was developed by who?
david ricardo
Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. True or False?
false
absolute advantage is the driving force of specialization
false
The "price" of a currency is determined by what?
how much someone will pay for it
a countries CPF can be outside of a countries PPF if what
it does trade
If Shawn can produce donuts at a lower opportunity cost than Sue, then what should happen?
shawm has a comparative advantage in the production of donuts
define absolute advangtage
the ability to produce a good using fewer imputs
Define comparative advantage
the ability to produce a good using lower opportunity cost
some people see what has a drawback to international trade
the homogenization of cultures
adam smiths book
the wealth of all nations
the goal of a country concerning international trade is what
to have a favorable balance of trade
A country that currently does not trade with other countries could benefit by doing what?
trading with other countries