Homework #3 – Flashcards
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When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
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Rely upon one another for the goods and services we consume.
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An economy's production possibilities frontier is also its consumption possibilities frontier
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when the economy is self-sufficient.
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The most obvious benefit of specialization and trade is that they allow us to
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consume more goods than we otherwise would be able to consume.
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Ken and Traci are two woodworkers who both make tables and chairs. in one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is .
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1/6 table for Ken nand 1/3 table for Traci
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the producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good.
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has an absolute advantage in the producton of that good
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Adam smith asserted that a person should never attempt to make at home
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what it will cost him ore to make than to buy
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it is possible for the S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes every German workers.
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True
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opportunity cost refers to how many inputs a producer requires to produce a good
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False
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For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs
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True.
