ECO201 EXAM CH3
What must be given up to obtain an item is called
opportunity cost.
People who provide you with goods and services
do so because they get something in return.
Which of the following is not correct?
The gains from specialization and trade are based not on comparative advantage but on absolute advantage
When describing the opportunity cost of two producers, economists use the term
comparative advantage.
By definition, imports are
goods produced abroad and sold domestically.
Goods produced abroad and sold domestically are called
imports.
A person can benefit from specialization and trade by obtaining a good at a price that is
lower than his or her opportunity cost of that good.
A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his
production possibilities frontier.
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.
When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy
rises.
The opportunity cost of an item is
what you give up to get that item.