Key ideas review
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| What is a production possibilities frontier? | A curve on a graph that illustrates the possible quantities of two products that can be produced if both depend on the same finite resources for their manufacture
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| Points inside the frontier ___ | Are achievable but don't make full use of the resources
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| Points outside of the frontier___ | Are unachievable because there aren't enough resources
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| What would cause the PPF to shift outwards? | An increase in workers, increase of input, improved technology
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| What would cause the PPF to rotate outwards? | An improvement or increase in the production of only ONE of the goods
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| Define absolute advantage | When a producer can generate more output than others with a given amount of resources
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| Define comparative advantage | When a producer can make a good at a lower opportunity cost than other producers
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| What is the rule about comparative and absolute advantage? | You cannot have comparative advantage over everything, because then it would be absolute advantage
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| Define specialization | The practice of spending all your resources on a particular good
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| What happens when you focus on producing the good for which you have comparative advantage? | Total production increases (because all your resources are devoted to the production of just one good)
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| Define gains from trade | The outcome that occurs when specialized producers exchange goods and services (When specialized producers trade they will always end up with a surplus)
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