2. Trade - Trade-offs, Comparative Advantage, and the...

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Trade-offs, Comparative Advantage, and the Market System Scarcity – a situation in which unlimited wants exceed the limited resources available to fulfill those wants Production Possibilities Frontier (PPF) - a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology Opportunity cost – the highest-valued alternative that must be given up to engage in an activity Trade – the act of buying and selling Absolute advantage – the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources Comparative advantage – the ability of an individual, a firm or a country to produce a good or service at a lower opportunity cost than competitors. The basis of trade is comparative advantage, not absolute advantage Market – a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
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2. Trade - Trade-offs, Comparative Advantage, and the...

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