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These flashcards cover key economic concepts related to opportunity cost, production possibilities, and the implications of trade.
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Opportunity Cost
The value of what you must give up in order to get something, or the value lost from choosing the next best alternative.
Production Possibilities Frontier (PPF)
A model that illustrates the maximum feasible amount of two goods that can be produced with available resources.
Absolute Advantage
The ability of a country to produce more of a good or service with the same amount of resources compared to another country.
Comparative Advantage
The ability of a country to produce a good or service at a lower opportunity cost than another country.
Explicit Costs
Direct, out-of-pocket expenses that a firm incurs, such as payments for resources used in production.
Implicit Costs
Costs that represent the opportunity cost of using resources owned by a firm, such as the income foregone from an alternative use of those resources.
Gains from Trade
The increased output resulting from the specialization of labor and trade between parties.
Invisible Hand
The concept that individuals acting in their own self-interest can lead to economic benefits for society as a whole.
Shifts in PPF
Changes to the production frontier that occur due to factors like technological advancements or changes in resource availability.
Specialization
The focus of resources on the production of specific goods or services to improve efficiencies and increase overall production.