Chapter 2 - Economic Tools and Economic Systems

get a hint

hint

absolute advantage

absolute advantage

refers to the ability to make something using fewer resources than other producers use.

PPF

The production possibilities frontier, or ________, depicts an economy's productive capacity when all resources are utilized efficiently.

time consuming

Because learning about alternatives is expensive and ________, some decisions are made on the basis of incomplete or even incorrect information.

law of comparative advantage

According to the ________, the person who has the lowest opportunity cost of creating a certain item should specialize in that good.

Comparative advantage

________ focuses on what else those resources could generate- that is, on the opportunity cost of those resources.

PPF

The ________ can migrate in and out of play over time as a result of changes in resource availability, technology, or game regulations.

comparative advantage

Most individuals eat just a small portion of what they produce and generate only a small portion of what they consume due to specialization and ________.

Comparative advantage

________ is a superior criterion for determining who should do what.

Opportunity cost

value of the best alternative is forgone when an item or activity is chosen

Sunk cost

A cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions