Ch.3 Vocab
What must be given up to obtain an item is called
opportunity cost.
Trade between countries
allows each country to consume at a point outside its production possibility frontier.
Productivity is defined as the
amount of goods and services produced from each unit of labor input.
When describing the opportunity cost of two producers, economists use the term
comparative advantage.
By definition, imports are
goods produced abroad and sold domestically.
By definition, exports are
goods produced domestically and sold abroad
Absolute advantage is found by comparing different producers'
input requirements per unit output.
Gains from trade
is the increase in total production due to specialization allowed by trade.
When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
rely upon one another for the goods and services we consume.
An economy's production possibilities frontier is also its consumption possibilities frontier
when the economy is self-sufficient.