intro macroeconomics: ch 2 assignment
your consumption point before trade is illustrated by point
A
your neighbor's consumption point after trade is illustrated by point
D
a production possibilities frontier (PPF) is
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
circular-flow diagram
a simple economic model to see how participants in markets are linked
two key groups participate in markets. A __________ consists of all the individuals in a home. __________ are suppliers of goods and services. we can use a simple economic model called the __________ to see how participants in markets are linked.
a) household b) firms c) circular-flow diagram
the primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost
firms
are suppliers of goods and services. firms use the funds they receive from selling goods and services to buy the factors of production needed to make the goods and services
the production possibilities frontiers depicted in the diagram to the right illustrate
both the labor force and capital stock increasing
the basis for trade is __________ advantage
comparative
a household
consists of all the individuals in a home. households are suppliers of factors of production-particularly labor-used by firms to make goods and services. households use the income they receive from selling the factors of production to purchase the goods and services supplied by firms
A(n) __________ is someone who operates a business, bringing together the factors of production—labor, capital, and natural resources—to produce goods and services.
entrepreneur
on the diagram to the right, movement along the curve from points A to B to C illustrates
increasing marginal opportunity costs
in the diagram to the right, point F indicates an
inefficient result
product markets
markets for goods—such as computers—and services—such as medical treatment
factor markets
markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability
the Scottish philosopher Adam Smith argued in 1776 that
prices would do a better job of coordinating the activities of buyers and sellers than guilds could
the primary difference between product markets and factor markets is that
product markets are markets for goods, while factor markets are markets for factors of production—labor, capital, natural resources, and entrepreneurial ability
the production possibilities frontiers depicted in the diagram to the right illustrate
technological advances in the tank industry
one of the great benefits of trade is
that it makes it possible for society to become better off by increasing its consumption
comparative advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
absolute advantage
the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
property rights are
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it
in the diagram to the right, point G indicates an
unattainable result
a free market exists
when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed
