Important Vocabulary For Chapter 2 In Econ12 Text

Front 1

What is absolute advantage?

Back 1

One person has an absolute advantage over another if he or she takes fewer hours to perform a task than the other person.

Front 2

What is Comparative Advantage?

Back 2

One person has a comparative advantage over another if his or her opportunity cost of performing a task is lower than the other person's opportunity cost.

Front 3

What is the Principle of comparative advantage?

Back 3

Everyone does best when each person (or country) concentrates on the activities for which his or her opportunity cost is lowest.

Front 4

What is the production possibilities curve?

Back 4

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

Front 5

Whats an attainable point?

Back 5

any combination of goods that can be produced using currently available resources.

Front 6

What is an unattainable point?

Back 6

Any combination of goods that cannot be produced using currently available resources.

Front 7

What is an Inefficient point?

Back 7

Any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of the other.

Front 8

What is an efficient point?

Back 8

Any combination of goods for which currently available resources do not allow an increase in the production of one good without a reduction in the production of the other.

Front 9

What is the principle of increasing opportunity cost? (Also called "the Low-Hanging-Fruit principle")

Back 9

In expanding the production of any good, first employ those resources with the lowest opportunity cost and only afterward turn to resources with higher opportunity costs.