1. Chapter 2 section 3 Absolute Advantage means being able to do something using fewer resources than other producers require. Law of comparative advantage, the worker with the lower opportunity cost of producing a particular output should specialize in that output. Specialization-occurs when individual workers focus on single tasks, enabling each one to be more efficient and productive.

2. Exchange Barter-a system of exchange in which products are traded directly for other products. Works in simple economy Money- coins, bills, and checks- serves as medium of exchange because it is the one thing that everyone is willing to accept in exchange for all goods and service.

3. Division of labor Division of labor – sorts the production process into separate workers. Each worker specializes in a separate task. It allows the group to produce much more. Owner – managers- assistant mangers- employees.