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Question 1

What is the production possibilities frontier (PPF)?

Answer 1

An economic model shows all the combinations of goods that a country can produce given its productivity and supply of inputs
On the line is efficient
Off the line is unemployment or unattainable

Question 2

What is absolute advantage?

Answer 2

The ability to produce the same good using fewer inputs (costs) than another producer

Question 3

What is comparative advantage?

Answer 3

Producing goods at a lower opportunity cost than another

Question 4

How can you estimate opportunity cost (comparative advantage) using the PPF?

Answer 4

a/b for 1, a/b for 2
Whoever has the higher fraction has the advantage

Question 5

If people/nations specialize and trade what happens to their consumption relative to their PPF?

Answer 5

Goes up?

Question 6

What is the relationship between specialization, knowledge, productivity, and economic growth?

Answer 6

positive

Question 7

What is the relationship between trade and specialization?

Answer 7

positive