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Chapter 2 Comparative Advantage
Microeconomics
9
Economics
Undergraduate 1
02/09/2015

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Term
Absolute Advantage
Definition

 

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

 

Term
Comparative Advantage
Definition

 

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

 

Term
The Principle of Comparative Advantage
Definition

 

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

 

Term
Production Possibilities Curve
Definition
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
Term
Attainable Point
Definition

 

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

 

Term
Unattainable Point
Definition

 

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

 

Term
Inefficient Point
Definition

 

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 another.

 

Term
Efficient Point
Definition

 

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.

 

Term
Outsourcing
Definition

 

A term increasingly used to connate having services performed by low wage workers overseas.

 

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