ECON 2110 - Clemson - Exam 1 Questions and Answers Graded A+
Absolute Advantage - Answers The ability to produce a good using fewer inputs than another
producer.
Comparative Advantage - Answers The ability to produce a good at a lower opportunity cost
than another producer.
True or False: It is impossible for a country to have an absolute advantage in both goods. -
Answers False.
True or False: It is impossible for a country to have a comparative advantage in both goods. -
Answers True.
If you have the opportunity cost of one good, how can you find the opportunity cost of the other?
- Answers The inverse of the first good.
Trade Off - Answers The idea of having to sacrificing something for something else because of
limits.
In order to have a higher overall production, a country should specialize in the good that it has
a(n) (absolute/comparative) advantage in. - Answers Comparative Advantage.
What makes everyone better off? - Answers Trade
Production Possibility Frontier - Answers A graph that shows the combination of two goods the
economy can possibly produce given the available technology.
Point A, B, and C: Possible and Efficient
Point D: Possible but Inefficient
Point E: Not Possible (unless technology gets better) - Answers Points A, B, and C are
considered:
Point D is considered:
Point E is considered:
Opportunity Cost - Answers What must be given up to obtain a different item.
From the PPF, how can you find the opportunity cost of one good? - Answers The slope of the
PPF
What two ways can shift the PPF outward? - Answers 1. Obtaining additional resources.
2. Improvement in technology.
Absolute Advantage - Answers The ability to produce a good using fewer inputs than another
producer.
Comparative Advantage - Answers The ability to produce a good at a lower opportunity cost
than another producer.
True or False: It is impossible for a country to have an absolute advantage in both goods. -
Answers False.
True or False: It is impossible for a country to have a comparative advantage in both goods. -
Answers True.
If you have the opportunity cost of one good, how can you find the opportunity cost of the other?
- Answers The inverse of the first good.
Trade Off - Answers The idea of having to sacrificing something for something else because of
limits.
In order to have a higher overall production, a country should specialize in the good that it has
a(n) (absolute/comparative) advantage in. - Answers Comparative Advantage.
What makes everyone better off? - Answers Trade
Production Possibility Frontier - Answers A graph that shows the combination of two goods the
economy can possibly produce given the available technology.
Point A, B, and C: Possible and Efficient
Point D: Possible but Inefficient
Point E: Not Possible (unless technology gets better) - Answers Points A, B, and C are
considered:
Point D is considered:
Point E is considered:
Opportunity Cost - Answers What must be given up to obtain a different item.
From the PPF, how can you find the opportunity cost of one good? - Answers The slope of the
PPF
What two ways can shift the PPF outward? - Answers 1. Obtaining additional resources.
2. Improvement in technology.
