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Comparative advantage refers to:

Being the lowest relative opportunity cost producer of a good.

is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost.

Optimization

When people trade - producers can achieve something they can't without trade. Thus - only with trade is it:

Possible to operate outside the production possibilities frontier

Which of the following help measure the quality of a good economic model?

Whether it gives us insights that can be used in the real world How well it reflects reality

If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is:

a net gain to the economy

A production possibilities frontier that illustrates a 1-for-1 trade off between goods is drawn as:

a straight, downward-sloping line

For an entire economy, the production possibilities frontier is going to be:

bowed out because we have different resources with different opportunity costs.

If the price is too _____ producers will not be eager to sell, but buyers will be willing and able to buy.

cheap

A producer has a(n) ______ advantage in the production of a good or a service if his or her relative opportunity cost of production is lower than the opportunity cost of other producers.

comparative

If you are relatively better at something, then you are said to have a(n) _____ advantage in that activity.

comparative

Producing a good or a service at a lower opportunity cost gives the producer:

comparative advantage in the market

Gains from trade can be measured by:

comparing the levels of consumption available before and after the trade

When you see a production possibilities frontier (PPF) drawn as a straight line, the opportunity cost of one good or service (in terms of units of the other good or service that must be given up) is assumed to be:

constant

If the marginal benefit of an activity exceeds the marginal cost of the activity (MB > MC), we should

continue to increase output until MB = MC

When the marginal benefit of an activity equals the marginal _____ there is no incentive to either increase or decrease the level of the activity performed.

cost

When resources are fixed, increasing the production of one good causes a(n) (increase/decrease) in the production of the other.

decrease

As the amount of an activity increases, its marginal benefit:

decreases

The opportunity cost of producing a good for one producer may be different from that of another because of:

differences in available resources and technology

When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is:

efficient

The benefit - or wealth - that accrues to a buyer or a seller as a result of trading one good - service - or resource for another is the:

gains from trade

f the price is too ____ producers will be eager to sell, but buyers will not be willing or able to buy.

high

As the amount of an activity increases, its marginal cost:

increases

In the real world, the opportunity cost of production_____ as production increases.

increases

Specialization causes individuals and nations to rely on one another and:

increases the degree of interdependence among them

When resources are allocated in such a way that it is possible to increase the production of one good without decreasing the production of another, then the allocation of resources is:

inefficient

On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated

inefficiently

On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated ____

inefficiently

Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the:

law of increasing opportunity cost

When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, then the production possibility frontier is:

linear

The additional benefit associated with one more unit of an activity is the _____ benefit.

marginal

The additional cost associated with one more unit of an activity is the _____ cost.

marginal

Focusing production entirely on one good or service leaves you susceptible to changes in the _____

market

Each row of the production possibilities schedule illustrates the _____ amount of a good or a service that may be produced, given the production of the other.

maximum

The law of increasing opportunity costs exists because:

not all resources are well-suited for all production

As long as there are differences in _____ costs, there are comparative advantages and there will be potential for trade to make both parties better off.

opportunity

If the terms of trade are the same as your _____ cost, you will receive no gains from the trade.

opportunity

The producer with the lowest relative ___ cost has a comparative advantage and should specialize in the production of that good.

opportunity

The value of the next-best forgone alternative is the ___ cost.

opportunity

___ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing

opportunity

Consider a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis. The slope of the PPF tells us the _____ of producing one additional unit of Good X.

opportunity cost

Individuals and countries specialize because of differences in:

opportunity costs

When the marginal benefit equals the marginal cost, we reach a(n):

optimal level of input

The line (or curve) that represents the combinations of the two goods produced on the production possibilities frontier is a boundary between output levels that are ______ and output levels that are unattainable.

possible

Combinations inside the production possibilities frontier are:

possible but inefficient

Comparative advantage refers to the ability to:

produce a good or service at a lower opportunity cost than others

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n)

production possibilities frontier

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) ____ _____ ______.

production possibilities schedule

The production possibilities frontier, or curve, is a graphical representation of the:

production possibilities theory

Although points on the production possibilities frontier represent the different combinations of output, ultimately what they show is how we allocate our scarce ___ to the production of two different goods or services.

resources

If you decide to produce at a level where marginal cost exceeds marginal benefit (MC > MB), there is a waste of _____ that could be better used somewhere else.

resources

when resources are ___ increasing the production of one good causes a decrease in the production of another

scarce

The idea that people choose to do the things that interest them is:

self-interest

A strong economic model allows us to analyze the economic events of the world by:

simplifying a very complex economic world

The opportunity cost of producing a good or a service can be found by:

solving for the cost of one good in terms of another

For an entire economy, the production possibilities frontier is going to be bowed out because:

some resources are better suited for producing some goods or services than others

In the real world, the opportunity cost increases as production increases, because:

some resources are better suited for producing some goods or services than others

____ is the result of low-cost producers focusing all their efforts on producing a single good or service

specialization

_____ in trade causes individuals and nations to become interdependent.

specialization

Because of differences in opportunity costs, individuals and businesses:

specialize in the production of the good for which they wield a comparative advantage

When production is characterized by constant opportunity costs, the resulting production possibilities frontier will be a __ line.

straight

A potential risk of specialization is:

susceptibility to market fluctuations

marginal cost

the additional cost associated with one more unit of an activity.

Decreasing marginal benefit describes:

the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed

Equilibrium occurs when:

the marginal benefit equals the marginal cost.

Terms of trade refers to

the price of one good or service in terms of another.

opportunity cost is

the value of the opportunity that you give up when you choose one activity instead of another.

The marginal benefit of an activity can be found by calculating the change in:

total benefits as the level of activity increases by one unit

Comparative advantage is the foundation for establishing the benefits of:

trade

Whether or not a good or service is traded depends largely on the terms of ___

trade

Economists use the phrase _____ to refer to the positive gains enjoyed by both buyers and sellers when they trade.

trade creates wealth

T or F: Beneficial terms of trade are the terms—or prices—that are between the two parties' opportunity costs.

true

If you continue producing when marginal benefit is less than marginal cost, you are:

wasting resources that would be better spent elsewhere

Combinations ____ the production possibilities frontier are possible but inefficient with the current resources and technology.

within