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.