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.