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15 Cards in this Set

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  • Back
Production Possibilities Frontier (PPF)
represents the possible combinations of two goods that can be produced in a certain period of time under conditions of any given state of technology and fully employed resources.
Production Possibilities Frontier (PPF)

Graph: straight line
represents a constant opportunity cost.
Production Possibilities Frontier (PPF)

Graph: bowed outward (concave downward)
represents the law of increasing opportunity costs.
Law of Increasing Opportunity Costs
as more of a good is produced, the opportunity costs of producing that good increase.
Product Efficiency
the condition where the maximum output is produced with given resources and technology.

Graph: a production point along the PPF.
Product Inefficiency
the condition where less than the maximum output is produced with given resources and technology.

It implies that more of one good can be produced without any less of another good being produced.

Graph: a production point to the left of the PPF.
Economic Growth
the increased productive capabilities of an economy due to an increase of resources or an advance in technology.

Graph: the PPF moving outward.
the body of skills and knowledge concerning the use of resources in production.
Exchange (Trade)
the process of giving up on thing for something else.
Ex Ante
phrase that means "before," as in before a trade.
Ex Post
phrase that means "after," as in after a trade.
Terms of Trade
how much of one thing is given up for how much of something else.
Transaction Cost
the costs associated with the time and effort needed to search out, negotiate, and consummate an exchange.
Comparative Advantage
the situation where someone can produce a good at lower opportunity cost than someone else.
producing a good with a comparative advantage, so that good can be traded for other goods.