Module 6.6 Comparative Advantage Lecture

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15 Terms

1
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What does competitive markets in equilibrium maximize?
Economic surplus.
2
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What concept is attributed to the efficient allocation occurring without central design?
The 'invisible hand.'
3
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What principle helps determine the optimal allocation of tasks across markets?
Comparative advantage.
4
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What was Russell's production time for pizza?
20 minutes.
5
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Who is more efficient in completing both products, Russell or Stephanie?
Stephanie.
6
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What was the total output of pizzas and tacos produced?
8 pizzas and 27 tacos.
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What is the financial value of Russell's output?
$132.
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What is the opportunity cost of 1 pizza for Russell?
4 tacos.
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Who has a comparative advantage in pizzas?
Stephanie.
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What did Russell focus on after specialization?
Tacos.
11
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What is total value after specialization for Russell and Stephanie?
$344.
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If Russell and Stephanie incorrectly specialize, what is the total value they create?
$300.
13
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What is essential for understanding gains from trade?
Comparative advantage.
14
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What benefit does individual specialization lead to?
Better resource allocation.
15
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Why is understanding opportunity costs crucial?
To determine comparative advantage.