Econ ch 8 (.1,.2,.3)

Terms of trade are determined

on the basis of opportunity costs

A production possibilities curve​ (PPC)

shows the relationship between the maximum production of one good for a given level of production of another good.

comparative advantage

the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

define trade

the action of buying and selling goods and services.

explain the forces through which trade creates value

Because the value of goods is subjective, voluntary trade creates value

define specialization of labor

an industrial relations and human resources term that refers to the segmenting of large, labor-intensive tasks into workable sub-tasks that may be done by different workers or different groups of workers

state and describe the law of increasing marginal opportunity costs

as you increase the production of one good, the opportunity cost to produce another good decreases

On the Production Possibilities​ Curve, possible production levels are​ represented:

at any point on or below the curve.

compare and contrast an attainable and unattainable point

attainable = on or below the PPC unattainable= above the PPC

A linear PPC would show

constant opportunity costs

compare and contrast an efficient and inefficient point

efficient= on the line inefficient= below the line

Terms of trade is the​

exchange rate of goods for goods.

California wine that is sold in New Jersey is an ________for California and an ___________for New Jersey.

export, import

You go to your doctor in​ Cincinnati, Ohio, and she takes an​ x-ray of your broken arm. The​ x-ray is read by a technician in​ Mumbai, India, and he sends a report via email to your doctor. The reading is an ___________ for India and an ___________for the United States.

export, import

absolute advantage

he ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

A construction company in China buys tractors from​ Caterpillar, which is based in Illinois. The tractors are an _________ for China and an ________ for Illinois.

import, export

You take a vacation in​ Paris, France. Your vacation is an _________ for the United States and an _________ for France.

import, export

a PPC that is curved away from the origin would show

increasing opportunity costs

terms of trade

the ratio at which a country can trade its exports for imports from other countries

If you produce at a point beyond your PPC​, then you are producing at a point that is​

unattainable