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