Comparative Advantage vs. Absolute Advantage:

Comparative- when a country's production of a good is produced at a lower opportunity cost

Individual/national- exists when an individual or nation can produce a good/service at a lower opp. cost than can another individual or nation

Lower opportunity cost

Absolute- when a country's cost of resources is less than another country

Individual- exists when a person can produce more of a certain goes / service in the same amount of time

National- exists when a country can produce more of a good/service than another country can in the same time period

Faster more efficient

Terms of Trade:

The ratio at which a country can trade domestic products for imported ones

Exchange Rates

The ratio at which two currencies are traded

Economic Integration

Occurs when two or more nations join to form a free trade zone

European Union

European trading that consists of 27 nations that have dropped all tariffs and trade barriers

Input problem vs. Output problem:

Input- what can be produced using the least amount of resources land or time

A chosen item/forgone item

Ex. Bread v. Beans 

Lowest opportunity cost

Output- production

What they give up/what is produced