AP Micro 3 by Savannah Julius

Quizlet

8juliuss — 2017-09-17 18:07:00 UTC

https://quizlet.com/_3ppktg

trade

8juliuss — 2017-09-18 14:30:05 UTC

allows for variety
specialization

Production Possibilities frontier

8juliuss — 2017-09-18 14:30:22 UTC

shows that people face trade offs

can also show consumption possibilities if there is NO trade

Specialization and trade...

8juliuss — 2017-09-18 14:30:54 UTC

...trade allows for specialization...

there is then MORE of each product even with the same input (time / amount of hours)

absolute advantage

8juliuss — 2017-09-18 14:31:54 UTC

compare inputs, such as TIME

opportunity cost goes hand in hand with comparative advantage

8juliuss — 2017-09-18 14:32:21 UTC

compare opportunity costs; whoever has the lowest has the comparative advantage, therefore they should specialization in producing that product

Have absolute advantage in both goods? POSSIBLE. Have comparative advantage in both goods? IMPOSSIBLE

8juliuss — 2017-09-18 14:33:21 UTC

gains from specialization and trade are BASED ON COMPARATIVE advantage

8juliuss — 2017-09-18 14:34:10 UTC

price v. opportunity cost

Price of Trade

8juliuss — 2017-09-18 14:34:45 UTC

price at which parties trade must lie BETWEEN the 2 opportunity costs in order to be mutually advantageous

imports and exports

8juliuss — 2017-09-18 14:35:30 UTC

specialization and trade from comparative advantage leads to higher quantity and variety of goods

principle of comparative advantage shows that trade can make everyone better off

8juliuss — 2017-09-18 14:36:18 UTC

interdependence is desirable

everyone enjoys greater quantity and variety, duh

8juliuss — 2017-09-18 16:05:24 UTC

opportunity cost of producing 1 lb cheese for US in terms of wheat:
costs 4 bushels

opportunity cost of producing 1 lb cheese for France in terms of wheat:
costs 2 bushels

opportunity cost of producing 1 bushel of wheat for US in terms of cheese:
costs 1/4 lb

opportunity cost of producing 1 bushel of wheat for France in terms of cheese:
costs 1/2 lb

Based on opportunity costs above...

8juliuss — 2017-09-19 16:05:04 UTC

France has a lower opportunity cost for producing only cheese (2 < 4); therefore, they should specialize in making cheese and trade

US has a lower opportunity cost for producing only wheat (1/4 < 1/2); therefore, they should specialize in producing wheat and trade

output

8juliuss — 2017-09-19 16:07:56 UTC