PPC & Comparative Advantage

What is opportunity cost?

• a graph that shows how much an economy can produce between 2 goods
• how much money something is
• the opportunity one has to give up in order to gain something else
• land, labor, capital, entrepreneurs

What is the production possibilities curve?

• a graph that shows how much an economy can produce between 2 goods
• how much money something is
• the opportunity one has to give up in order to gain something else
• land, labor, capital, entrepreneurs

The production possibilities curve is an illustration of what?

• Opportunity costs and trade-offs
• Only opportunity costs
• Only trade-offs
• none of the above

A focus on developing only certain skills or producing only certain goods/services

• Imports
• Exports
• Specialization
• Globalization

The measurable benefit of trade refers to

• the gain in potential consumption for both partners that results from specialization and trade.

• the gain received by the trading partner with the absolute advantage in both products.

• the gain received by the trading partner with the comparative advantage in both products.

• the terms of trade agreed upon by both trading partners.

• The greater profits that global firms experience.

Who has the ABSOLUTE advantage in making bracelets?

• Marie

• Isabella

Who has the ABSOLUTE advantage in making earrings?

• Marie

• Isabella

What is Marie's opportunity cost of making earrings?

• 3/2 (1.5) bracelets

• 2/3 (.67) bracelets

• 3/2 (1.5) earrings

• 2/3 (.67) earrings

What is Marie's opportunity cost of making bracelets?

• 3/2 (1.5) bracelets

• 2/3 (.67) bracelets

• 3/2 (1.5) earrings

• 2/3 (.67) earrings

What is Isabella's opportunity cost of making earrings?

• 1/2 (0.5) bracelets

• 2 bracelets

• 1/2 (0.5) earrings

• 2 earrings