BA 1310: Opportunity Cost, Production Possibilities and Economic Growth

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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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10 Terms

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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.

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Production Possibilities Frontier (PPF)

A model that illustrates the maximum feasible amount of two goods that can be produced with available resources.

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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.

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Comparative Advantage

The ability of a country to produce a good or service at a lower opportunity cost than another country.

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Explicit Costs

Direct, out-of-pocket expenses that a firm incurs, such as payments for resources used in production.

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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.

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Gains from Trade

The increased output resulting from the specialization of labor and trade between parties.

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Invisible Hand

The concept that individuals acting in their own self-interest can lead to economic benefits for society as a whole.

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Shifts in PPF

Changes to the production frontier that occur due to factors like technological advancements or changes in resource availability.

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Specialization

The focus of resources on the production of specific goods or services to improve efficiencies and increase overall production.