ECON chapter 2
A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
Production Possibilities Frontier (PPF)
what are copyrights designed to accomplish?
Protect intellectual property rights
which of the following is critical to the success of the market system?
To allow individuals or firms to have exclusive use of their property
a shift in a curve that isn't connected at a point is caused by
a technological advance that affects both productions of the two products
in the united states, property rights:
are guaranteed by two amendments to the U.S. Constitution
Households provide _______ to the factor market? a. Finished goods and services b. Income c. Factors of production d. All of the above
c. Factors of production
individuals and firms are better off if the specialize in producing goods and services for which they have a ______________
comparative advantage (lower opportunity cost) and obtain the other goods/services they need through trade
what is the basis for trade?
comparative advantage, not absolute advantage
the ability of the economy to increase the production of goods and services
economic growth
Firms pay money to households for
factors of production
Households pay money to firms for
goods and services
Contracts, insurance, patents and accounting rules are:
inventions that make a market work better
the role of a entrepreneur always imvolves
taking risks
What is an export?
Goods and Services sold to other countries
according to the theory of comparative advantage, specialization and free trade will benefit
all trading partners who specialize in goods where they have comparative advantage
households provide what to firms?
factors of production
the principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the ______________ the payoff to devoting additional resources to that activity
smaller
why are opportunity costs not always constant and often increasing?
some resources are better suited to one task than another
Ms. Boulware is the best lawyer and the best secretary in town. She has:
an absolute advantage in both jobs
A product produced in a foreign country and purchased by residents of the home country is called:
an import
in a circular flow model of the economy, _______________ are the suppliers of goods and services
firms
A market with few government restrictions on how a good or service can be produced or sold or how a factor of production can be employed.
free market
firms provide what to households?
goods and services
if a country has a comparative advantage in the production of a good, then that country
has a lower opportunity cost in the production of that good
Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):
invisible hand
if prices are ______________ the collective actions of self-interested agents signals the relative worth of goods/services (invisible hand)
invisible hand
factor market
market in which firms purchase the factors of production from households
what is the name given to the highest-valued alternative that must be given up to engage in any activity?
opportunity cost
When nations specialize in their comparative advantage and engage in trade:
overall standards of living increase
in a free market, all individual act on their what?
own rational self interest
absolute advantage is the ability of an individual/firm/country to
produce more of a good or service than competitors using using the same amount of resources
in the circular flow model, which of the following refers to markets where goods such as computers or services such as a medical treatment are offered?
product markets
as more economic resources come available, the economy can achieve
production combinations that were previously unattainable
Shifts in the production possibilities frontier
represent economic growth and decline
specialization increased productivity. what was the cause of this phenomenon?
the division of labor
the slope of a production possibility curve represents the
the opportunity cost of producing one more unit of a good in terms of the forgone production of the other good
opportunity cost equation
what you give up/what you gain
the act of buying and selling
trade