Chapter 2 - Economic Tools and Economic Systems

absolute advantage

The term ________ refers to the ability to make something using fewer resources than other producers use.

PPF

The production possibilities frontier, or ________, depicts an economy's productive capacity when all resources are utilized efficiently.

Opportunity cost

________ depends on your alternatives.

time consuming

Because learning about alternatives is expensive and ________, some decisions are made on the basis of incomplete or even incorrect information.

law of comparative advantage

According to the ________, the person who has the lowest opportunity cost of creating a certain item should specialize in that good.

Comparative advantage

________ focuses on what else those resources could generate- that is, on the opportunity cost of those resources.

PPF

The ________ can migrate in and out of play over time as a result of changes in resource availability, technology, or game regulations.

comparative advantage

Most individuals eat just a small portion of what they produce and generate only a small portion of what they consume due to specialization and ________.

Comparative advantage

________ is a superior criterion for determining who should do what.

Sunk cost

A cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions

Opportunity cost

value of the best alternative is forgone when an item or activity is chosen

law of comparative advantage

According to the ________, the person who has the lowest opportunity cost of creating a certain item should specialize in that good.