Chapter 2 - Comparative advantage

Efficient point

________: any combination of goods for which currently available resources do not allow increase in the production of one good with out a reduction in the production of the other.

Production possibilities

________: curve graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.

Attainable point

________: any combination of goods that can be produced using currently available resources.

Inefficient point

________: any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of the other.

Absolute advantage

one person has an absolute advantage over another if he/she takes fewer hours to perform a task than the other person

Comparative advantage

one person has a comparative advantage over another if his/her opportunity cost of performing a task is lower than the other person's opportunity cost

Production possibilities

curve graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good

Attainable point

any combination of goods that can be produced using currently available resources

Unattainable point

any combination of goods that cannot be produced using currently available resources

Inefficient point

any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of the other

Efficient point

any combination of goods for which currently available resources do not allow increase in the production of one good with out a reduction in the production of the other

Principle of increasing opportunity cost = "low-hanging fruit principle"

in expanding the production of any good, first employ those resources with the lowest opportunity cost and only afterward turn to resources with higher opportunity costs

Outsourcing

term increasingly used to connote having services performed by low wage workers overseas

Absolute advantage

One person has an absolute advantage over another if he/she takes fewer hours to perform a task than the other person

Comparative advantage

One person has a comparative advantage over another if his/her opportunity cost of performing a task is lower than the other person's opportunity cost

Production possibilities

Curve graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good

Attainable point

Any combination of goods that can be produced using currently available resources

Unattainable point

Any combination of goods that cannot be produced using currently available resources

Inefficient point

Any combination of goods for which currently available resources enable an
increase in the production of one good without a reduction in the production of the other

Efficient point

Any combination of goods for which currently available resources do not allow
increase in the production of one good with out a reduction in the production of the other

Principle of increasing opportunity cost = "low-hanging fruit principle"

In expanding the production of any good, first employ those resources with the lowest opportunity cost and only afterward turn to resources with higher opportunity costs

Outsourcing

Term increasingly used to connote having services performed by low wage workers overseas