Economics - Chapter 3 Quiz

Once we figure the opportunity costs of each individual, you should do what your best at to compared to ______________________________

What you could be doing.

Opportunity cost

Whatever must be given up to obtain some item.

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 of green beans, then the opportunity cost of 1 bushel of green beans is

5/3 bushels of corn (Reciprocal)

If we both specialize in what we do and trade, ______________________________________

Both get an advantage

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton.

Is equal to 1.

Trade makes everyone _______________________ because it allows people to specialize in those activities in which they have a comparative advantage.

better off

Absolute advantage is

critical

Imports

goods produced abroad and sold domestically

Exports

goods produced domestically and sold abroad

Comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

Absolute advantage

the ability to produce a good using fewer inputs than another producer