AP ECON: Quiz 1

Absolute advantage

The ability to produce something more efficiently

Capital

Productive equipment or machinery

Comparative advantage

The ability to produce something with a lower opportunity cost

Economics

A social science that studies how resources are used and it's often concerned with how resources can be used to their fullest potential

Efficiency

Using resources to their maximum potential

Labor

All human activity that is productive

Land

All natural resources

Law of increasing costs

Law that states that when more of a product is initially being produced, the higher the opportunity cost will be to produce still more

Macroeconomics

Economic problems encountered by the nation as a whole

Microeconomics

Economic problems faced by individual units within the overall economy

Normative economics

Economics involving value judgments

Opportunity cost

The amount of one good that must be sacrificed to obtain an alternative good

Opportunity cost of good x=

Change in good Y production/Change in good X Production

Positive economics

Economics analysis that draws conclusions based on logical, deduction or induction value judgments are avoided

Production possibilities frontier

The combination of two goods that can be produced if the economy uses all of its resources, fully and efficiently

Resource

Anything that can be used to produce a good or service

Terms of trade

The amount of one good a country is willing and able to trade for another