Clark AP Micro Vocab 2
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Created by:
mrplayer on January 24, 2011
Subjects:
production possibilities and comparative advantage
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14 terms
Terms | Definitions |
|---|---|
 trade-off | when you give up something in order to have something else (9) |
| production possibilities curve | a graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good; it illustrates the trade-offs facing an economy that only produces two goods (25-27) |
| efficient in production | when an economy is producing at a point on its production possibility frontier; the production of any particular mix of goods and services in the least costly way; also known as productive efficiency (24-25, 29) |
| efficient in allocation | the production of the particular mix of goods and services most highly valued by society; requires that the economy allocate its resources so that consumers are as well off as possible; also known as allocative efficiency; where MB=MC (24-25, 28-29) |
| economic growth | the ability of the economy to produce increasing quantities of goods and services (29-31) |
| consumer goods | products and services that satisfy human wants directly (23) |
| capital goods | products that satisfy our wants indirectly by making possible more efficient production of consumer goods (23) |
| law of increasing opportunity costs | As the production of a particular good increases, the opportunity cost of producing an additional unit rises (i.e. the MC increases); rationale: economic resources are not completely adaptable to alternative uses (27) |
| trade | the exchange of goods and services between people |
| gains from trade | people can get more of what they want through trade than they could if they tried to be self-sufficient (99-101) |
| specialization | each person specializes in the task that he or she is good at performing (62, 98-101) |
| comparative advantage | the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers (98-101, 732-736) |
| absolute advantage | the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources |
| terms of trade | The rate at which units of one product can be exchanged for units of another product; the price of a good or service; the amount of one good or service that must be given up to obtain 1 unit of another good or service (736) |
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