ECON 2110 - Clemson: Exam 1 Questions and Answers
2023 with complete solution
Absolute Advantage
The ability to produce a good using fewer inputs than another producer.
Comparative Advantage
The ability to produce a good at a lower opportunity cost than another producer.
Possible
It is ( possible/impossible ) for a country to have an absolute advantage in both
goods.
Impossible
It is ( possible/impossible ) for a country to have a comparative advantage in both
goods.
The inverse of the first good
If you have the opportunity cost of one good, how can you find the opportunity cost
of the other?
Trade Off
The idea of having to sacrifice something for something else because of limits.
Comparative Advantage
In order to have a higher overall production, a country should specialize in the good
that it has a(n) (absolute/comparative) advantage in.
Trade
What makes everyone better off?
Production Possibilities Curve/Frontier
shows maximum amount of any two products that can be produced from a fixed set
of resources, and the possible trade-offs in production between them.
Private Property Rights
1. The right to exclusive use
2. Legal Protection
3. The right to transfer, sell, exchange, or mortgage.
Creative Destruction
through entrepreneurial discovery and innovation, new products and methods of
production are continuously replacing old one.
Point A, B, and C: Possible and Efficient
Point D: Possible but Inefficient
Point E: Not Possible (unless technology gets better)
Points A, B, and C are considered:
Point D is considered:
Point E is considered:
Opportunity Cost
What must be given up to obtain a different item.
The slope of the PPF
From the PPF, how can you find the opportunity cost of one good?
1. Obtaining additional resources.
2. Improvement in technology
What two ways can shift the PPF outward?
When the opportunity cost of a good rises as more of the good is produced.
What can cause the PPF to be bow shaped?
2023 with complete solution
Absolute Advantage
The ability to produce a good using fewer inputs than another producer.
Comparative Advantage
The ability to produce a good at a lower opportunity cost than another producer.
Possible
It is ( possible/impossible ) for a country to have an absolute advantage in both
goods.
Impossible
It is ( possible/impossible ) for a country to have a comparative advantage in both
goods.
The inverse of the first good
If you have the opportunity cost of one good, how can you find the opportunity cost
of the other?
Trade Off
The idea of having to sacrifice something for something else because of limits.
Comparative Advantage
In order to have a higher overall production, a country should specialize in the good
that it has a(n) (absolute/comparative) advantage in.
Trade
What makes everyone better off?
Production Possibilities Curve/Frontier
shows maximum amount of any two products that can be produced from a fixed set
of resources, and the possible trade-offs in production between them.
Private Property Rights
1. The right to exclusive use
2. Legal Protection
3. The right to transfer, sell, exchange, or mortgage.
Creative Destruction
through entrepreneurial discovery and innovation, new products and methods of
production are continuously replacing old one.
Point A, B, and C: Possible and Efficient
Point D: Possible but Inefficient
Point E: Not Possible (unless technology gets better)
Points A, B, and C are considered:
Point D is considered:
Point E is considered:
Opportunity Cost
What must be given up to obtain a different item.
The slope of the PPF
From the PPF, how can you find the opportunity cost of one good?
1. Obtaining additional resources.
2. Improvement in technology
What two ways can shift the PPF outward?
When the opportunity cost of a good rises as more of the good is produced.
What can cause the PPF to be bow shaped?
