Fundamentals (1) Eco
Comparative advantage refers to:
Being the lowest relative opportunity cost producer of a good.
According to the circular flow diagram, which two groups interact in the resources market?
Households and firms
According to the circular flow, which two groups interact with each other in the product market?
Households and firms
Which of the following help measure the quality of a good economic model?
How well it reflects reality Whether it gives us insights that can be used in the real world
What is the stable level of output referred to as when the marginal benefit equals the marginal cost?
Optimal
A graph that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:
PPF
_ is/are also called factors of production since they are transformed into output during the production process.
Resources
n trade causes individuals and nations to become interdependent.
Specialization
"I love ice cream. But I've eaten so much ice cream today, I can't possible eat another cup."
The marginal benefit of eating ice cream is falling.
Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as:
allocating resources.
Individuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______.
allocating; scarcity
A producer has a(n) advantage in the production of a good or a service if his or her relative opportunity cost of production is lower than the opportunity cost of other producers.
comparative
Specialization in a particular good is based on advantage on the good
comparative
The producer with the lowest relative opportunity cost has a(n) _____ advantage and should specialize in the production of that good.
comparative
When you see a production possibilities frontier (PPF) drawn as a straight line, the opportunity cost of one good or service (in terms of units of the other good or service that must be given up) is assumed to be:
constant
When the marginal benefit of an activity equals the marginal __, there is no incentive to either increase or decrease the level of the activity performed.
cost
As the amount of an activity increases, its marginal benefit:
decreases.
The opportunity cost of producing a good for one producer may be different from that of another because of:
differences in available resources and technology.
The wealth - or additional well-being - created by trade -
does not have to be monetary.
The quality of a(n) _______ model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world.
economic
is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large.
economics
When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is:
effiecent
ability involves assuming risk and organizing resources into a productive process.
entrepreneurial
Someone who is self-interested only performs actions for his or her own benefit and not for the benefit of others.
false
In the circular flow model, households sell resources to and buy products from:
firms
Graphing the information in the production possibilities schedule produces the production possibilities:
frontier
The benefit - or wealth - that accrues to a buyer or a seller as a result of trading one good - service - or resource for another is the:
gains from trade.
As the amount of an activity increases, its marginal cost:
increase
Specialization causes individuals and nations to rely on one another and
increases the degree of interdependence among them.
On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time, then initially resources were allocated
inefficiently
Resources are also called:
inputs because they are transformed into output in the production process.
Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the:
law of increasing opportunity cost.
For two parties to be willing to trade, the terms of trade must be:
less than the buyer's opportunity cost but greater than the seller's opportunity cost.
When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:
marginal decision making.
When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:
marginal decision making.
The law of increasing opportunity costs exists because
not all resources are well-suited for all production.
Combinations outside of the production possibilities frontier are:
not currently possible to produce.
The _______ cost of producing a good or a service can be found by solving for the cost of one good in terms of another.
opportunity
he terms of trade that are beneficial to both parties are prices that lie between both the parties' ______.
opportunity costs
Individuals and countries specialize because of differences in:
opportunity costs.
Tools - machinery - and infrastructure are classified under the resource category of
physical capital
Combinations inside the production possibilities frontier are:
possible but inefficient.
The production possibilities frontier, or curve, is a graphical representation of the
production possibilities schedule.
Self-interest, marginal decision making, and optimization form the basis for:
rational decision making.
Drinkable water is ______ water in general.
relatively more scarce than
The circular flow model shows how households and firms interact in two key markets: the market and the market.
resource;product
In the circular flow model, households can obtain the income they need to buy the products they want to consume only by selling their - also known as factors of production.
resources
The points on the production possibilities frontier show how we allocate our scarce __ to the production of two different goods or services.
resources, inputs
Since Chevrolet Camaros represent a small subset of all automobiles in existence, they are relatively more:
scarce than automobiles in general.
A common economic situation where an economy's resources are insufficient to meet the existing wants and must be used judiciously is referred to as ______.
scarcity
The term ___ describes the fact that unlimited wants cannot be completely satisfied with limited resources.
scarcity
The idea that people choose to do the things that interest them is:
self-interest
n the real world, the opportunity cost increases as production increases, because:
some resources are better suited for producing some goods or services than others.
Because of differences in opportunity costs, individuals and businesses
specialize in the production of the good for which they wield a comparative advantage.
Marginal benefit is:
the additional benefit associated with one more unit of an activity
Whether a good or a service will be traded internationally depends largely on:
the terms associated with the trade.
Opportunity cost is:
the value of the opportunity that you give up when you choose one activity instead of another.
The marginal benefit of an activity can be found by calculating the change in:
total benefits as the level of the activity increases by one unit.
Whether or not a good or service is traded depends largely on the terms of
trade
Combinations lying __ the production possibilities frontier are possible but inefficient with the current resources and technology.
within