AP Micro Unit 1

The ability of a country to produce a good at a lower cost than another country can.

• Absolute Advantage

• Comparative Advantage

• Productive Advantage

• Production Advantage

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

• Production Possibilities Curve

• Product Efficiency Graph

• Allocation Efficiency Graph

• Factor Allocation Curve

the improvement in outcomes that occurs when producers specialize and exchange goods and services

• Gains from trade

• product maximization

• resource maximization

• trade maximization

the value of all resources used to produce a good or service; opportunity cost

• economic cost

• explicit cost

• implicit cost

• effective cost

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

• Poor

• 3rd World

• Scarcity

• Shortage

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

• Command Economy

• Mixed Economy

• Market Economy

• Traditional Economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

• Command Economy

• Mixed Economy

• Market Economy

• Traditional Economy

What does point Y represent on the PPC?

• Efficiency

• Unattainable / impossible

• Inefficency

• Nothing

Alex and Henry are completing group work for class. It takes Henry and Alex 1 hour to complete the worksheets, while Henry needs 2 and Alex 3 hours to finish the essays (see table). Assuming Alex and Henry decide to specialize and trade essays and worksheets with one another, what would be a terms of trade or exchange price that would satisfy both of them?

• Any price where an essay costs less than 2 worksheets

• Any price where an essay costs between 2 and 3 worksheets

• Any price where an essay costs more than 3 worksheets

• We cannot determine a mutually agreeable trading price

• Any trading price is possible

What is the opportunity cost of moving from point B to C on the curve?

• 30 tons of wheat

• 30 tons of steel

• 5 tons of wheat

• 5 tons of steel