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12 Cards in this Set
- Front
- Back
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Why are the Farmer and the Rancher better off by trading?
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They can specialize and have more of both potatoes and meat.
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What is absolute advantage?
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The ability to produce a good using fewer inputs than another producer.
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What is comparative advantage?
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The ability to produce a good at lower opportunity cost than someone else.
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What are two ways to measure differences in costs of production?
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Absolute Terms and Comparative Terms
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What are Absolute Terms?
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-Input costs in dollars
-Number of hours required to produce a unit of output |
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What are Comparative Terms?
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The opportunity cost of sacrificing one good for another.
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The Rancher has what kind of advtange with meat?
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Comparative Advantage
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The Farmer has what kind of advantage with potatoes?
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Comparative Advantage
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Why does trade benefit everyone?
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-Specialization in activities in which they have a comparative advantage
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Who has an absolute advantage?
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The person who can produce a good with a smaller quantity of inputs
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Who has a comparative advantage?
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The person with a smaller opportunity cost.
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Why isn't international trade like war?
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Trade raises EVERYONE's living quality
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