Homework #3

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all

An economy's production possibilities frontier is also its consumption possibilities frontier

The most obvious benefit of specialization and trade is that they allow us to

Ken and Traci are two woodworkers who both make tables and chairs. in one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is .

the producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good.

Adam smith asserted that a person should never attempt to make at home

it is possible for the S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes every German workers.

opportunity cost refers to how many inputs a producer requires to produce a good

For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs