Term
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Definition
| one person has an absolute advantage over another if he/she takes fewer hours to perform a task than the other person. |
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Term
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Definition
| One person has a comparitive advantage over another if his/her opportunity cost of performing a task is lower than the other person's. |
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| Principle of Comparitive Advantage |
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Definition
| Totaly output is largest when each person concentrates on the activities for which his/her opportunity cost is the lowest. |
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Term
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Definition
| Any combination of goods that can be produced using currently available resources. |
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Term
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Definition
| Any combination of goods that cannot be produced using currently available resources. |
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Term
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Definition
| Any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of another. |
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Term
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Definition
| Any combination of goods for which currently available resources do not allow an increase in the production of one good without a reduction in the production of another. |
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Term
| Principle of Increasing Opportunity Cost |
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Definition
| In expanding the production of any good, first employ those resources with the lowest opportunity cost. Only when all the lowest cost resources are employed does it make sense to use those with a higher opportunity cost. |
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Term
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Definition
| When an economy is using is economic resources in their most effective way. |
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Term
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Definition
| When it is impossible to reorganize economic resources so that at least one person is better off while nobody is worse off. |
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