Principles of Macroeconomics Chapter 2 The Economic Problem: Scarcity and Choice

According to the theory of comparative advantage, specialization and free trade will benefit _____

All trading parties, even when some are absolutely more efficient producers than others

Someone has a comparative advantage in producing a good if they can produce that good ________.

At a lower opportunity cost

Refers to things that have already been produced that are in turn used to produce other goods and services.

Capital

Because resources are scarce, the opportunity cost of investment in capital is ____.

Forgone present consumption

Outputs in the production process are _____.

Good and services of value to households

The process of using resources to produce new capital is _____.

Investment

Which word is NOT a resource as the term is used by economists?

Money

If the unemployment rate increases from 10% to 14%, the economy will _______.

Move away from the PPF toward the origin

Suppose you are deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. You are doing with the concept of ______

Opportunity costs

Periods of less than full employment correspond to _______.

Points underneath the PPF

The process by which resources are transformed into useful forms is _____.

Production

The opportunity cost of investment in capital is foregone present consumption because _______.

Resources are scarce

An example of forgoing present benefits in order to receive future benefits is _____.

Saving

The concept of opportunity cost is based on the principle of _____.

Scarcity

The concept of trade-offs would become irrelevant if ______

Scarcity was eliminated

In economics, investment always refers to _______.

The creation of capital

An example of an investment is _____.

The purchase of a Hewlett-Packard Packard laser printer for use by a business

When two people trade _________.

They both expect to be made better off by the exchange

If someone has a comparative advantage in growing pineapples,

They can grow pineapples at a lower opportunity coast than other pineapple growers

According to the theory of comparative advantage, ______ raise(s) productivity by lowering opportunity costs.

Trade and specialization