AP Microeconomics Basic Economic
Concepts
absolute advantage - answersThe ability to produce more of a good or service than
another person or society with the same number of inputs. Alternatively, it means one
person or society can make a unit of output with fewer units of input than its counterpart.
allocative efficiency - answersThe amount of production hat benefits society the most. It
is achieved when the marginal benefit of production equals marginal cost. Also known
as socially optimal level of output. A society is allocatively efficient when it is choosing to
make the mix of goods that best satisfy the wants of its population.
capital - answersThe tools, machines, factories, and buildings used to produce goods
and services. Includes physical capital, which ranges from hammers to industrial robots
and human capital which is specialized skills.
ceteris paribus - answers"Other things being equal." The assumption that all variables
remain constant except for those being studied by the economist.
Concepts
absolute advantage - answersThe ability to produce more of a good or service than
another person or society with the same number of inputs. Alternatively, it means one
person or society can make a unit of output with fewer units of input than its counterpart.
allocative efficiency - answersThe amount of production hat benefits society the most. It
is achieved when the marginal benefit of production equals marginal cost. Also known
as socially optimal level of output. A society is allocatively efficient when it is choosing to
make the mix of goods that best satisfy the wants of its population.
capital - answersThe tools, machines, factories, and buildings used to produce goods
and services. Includes physical capital, which ranges from hammers to industrial robots
and human capital which is specialized skills.
ceteris paribus - answers"Other things being equal." The assumption that all variables
remain constant except for those being studied by the economist.
