Intro to Economics II
Terms
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- Opportunity Cost
- The highest value alternative that must be forgone when a choice is made
- Tradeoff
- Giving up one good in order to get another
- PPC
- Production Possibility Curve--a graphic representation showing the maximum quantity of goods and services that can be produced using limited resouces to the fullest extent
- Marginal Opportunity Costs
- The ammount of one good or service that must be given up to obtain one additional unit o fanother good or service
- The Law of Increasing Costs
- That fact that opportunity cost of additional units of a good generally increases as production of more units in attempted. This why the PPC is bowed out.
- Efficiency
- When an imput produces the maximum possible output. Or, the situation in which a given output is produced at minimun cost.
- Marginal Cost
- Cost of one more unit
- Marginal Benefit
- Additional benefit of one more unit.
- Inefficient Point
- Not producing to maxmimum potential. (Any point below the PPC.)
- Absolute Advantage
- Being able to produce more of a good (or at a lower cost) than someone else.
- Comparative Advantage
- The ability to produce a good or service at a lower opportunity cost (relative cost) than someone else.