Chapter 3 Interdependence and the Gains From Trade

Absolute advantage

the ability to produce a good using fewer inputs than another producer does.

Opportunity cost:

whatever must be given up in order to obtain some item. It can also be defined as the value of the next best alternative. Example: What would you do if you did not do what you did?

Comparative advantage:

the ability to produce a good at a lower opportunity cost than another producer.

Imports

goods produced abroad and sold domestically.

Exports

goods produced domestically and sold abroad.