Understanding Trade and Production Possibilities

A collection of flashcards covering key concepts related to trade, production possibilities, and the impacts of tariffs.

Trade

The exchange of goods and services between individuals or entities.

Production Possibilities Curve (PPC)

A graph that shows the maximum production levels of one good for a given level of production of another good.

Efficient Production Combinations

Points on the PPC where all resources are used effectively to produce goods.

Inefficient Production

Levels of production that can be achieved but do not fully utilize all resources, represented by points below the PPC.

Unattainable Production Points

Points that cannot be reached with current resources, represented by points above the PPC.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Comparative Advantage

The ability of an economic agent to produce goods at a lower opportunity cost than another.

Specialization

The process of focusing resources on the production of a limited range of goods to gain efficiencies.

Exports

Goods produced domestically and sold to another state or country.

Imports

Goods produced in another state or country that are sold domestically.

Tariff

A tax imposed on imported goods that raises their market price.

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive.

Deadweight Loss

Economic losses that occur when market equilibrium is not achieved, often due to tariffs or taxes.

Winners and Losers in Trade

The different effects of trade agreements, where some benefit while others may face disadvantages.