Global Economics: Production Possibilities Frontier & Rationale for Trade

These flashcards encapsulate key concepts from the lecture on the Production Possibilities Frontier and the rationale for trade.

What is the Production Possibilities Frontier (PPF)?

The PPF is a graphical representation of the maximum combinations of goods and services a country can produce at full employment of resources and technology.

What does the PPF illustrate about opportunity cost?

The PPF illustrates the opportunity cost of producing one good over another, indicating how much of one good must be given up to produce more of another.

What happens to the PPF when economic growth occurs?

The PPF shifts outward, indicating an increase in the economy's capacity to produce more goods and services.

What is absolute advantage?

Absolute advantage is the ability of an entity to produce more of a good with the same amount of resources or to produce the same output with fewer resources.

What is comparative advantage?

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

Who conceptualized the idea of comparative advantage?

British economist David Ricardo is credited with the concept of comparative advantage.

How does specialization relate to trade?

Specialization allows countries to produce goods where they have a comparative advantage, leading to increased overall production and potential gains from trade.

What is the paradox of choice in online dating, according to recent studies?

The paradox of choice suggests that having too many options in online dating may lead to less happiness and satisfaction.

How do efficiency and the PPF relate?

Efficiency refers to using all resources without waste, which is represented by points on the PPF. Points inside the PPF indicate inefficiency.

What is an example of resource acquisition for economic growth?

Acquiring new land, labor, or capital can drive economic growth, improving the production capacity.