Chapter 2: Economic Models

Question 1

Production possibilities Frontier (PPF) is used to

Answer 1

used to show what combo of outputs an economy can produce at a particular point in time given its available productive resources + production tech

Question 2

Examples of productive resources/factors of production

Answer 2

land
labour
physical capital
human capital

Question 3

comparative advantage

Answer 3

when a person can produce a good at a lower OC than another person

Question 4

Absolute Advantage

Answer 4

Uses fewer production resources to produce a good or service to another person

Question 5

3 things that specialization + trade show us?

Answer 5

1. 2 parties can benefit from trade even if 1 has an absolute advantage in production of all foods
2. differences in OC generate potential gains from trade
3. differences in OC determine pattern of trade (who does what)