Chap. 1 Rev.
The greatest output of goods and services through the best use of resources.
efficiency
When the govt. of a country must make a decision between increasing military spending and subsidizing wheat farmers.
An example of guns or butter is:
Whether or not to hire new workers.
Which of the following is the kind of decision that can be made at the margin?
All resources are scarce.
Why are all goods and services scarce?
The resources used to make all goods and services are called the factors of production.
Define factors of production.
The opportunity cost of a decision can be examined by using a production possibilities graph.
How can one examine the opportunity cost of a decision?
The increasing costs resulting in increasingly less output.
Production possibilities frontiers curve on a chart due to what?
Temporary lack of one or more goods.
Shortage
Enough workers to finish two jobs because there's a limited supply of workers.
The lack of the following represents a scarcity.
Physical objects that can be exchanged.
What are goods?
land, labor, and capital
What are the factors of production?
All the possible alternatives that are rejected when a choice is made.
What are trade-offs?
The maximum amount that an economy can produce.
What does a production possibilities frontier show?
When an economy increases the production of one item the opportunity cost goes up
What does the law of increasing costs mean?
physical capital
What is a factory building an example of?
A representation of alternative ways to use an economy's resources.
What is a production possibilities graph?
One that uses its resources to make the most goods and services.
What is an efficient economy?
The use of resources in a way that maximizes output of goods and services.
What is an efficient economy?
An example of a shortage is limited amounts of food available because the trucks carrying it are on strike.
What is an example of a shortage?
The most desirable alternative given up when people choose once course of action over another.
What is an opportunity cost?
Any resources that are made by humans and used to create other goods and services are called capital.
What is capital?
Having limited quantities of resources to meet unlimited needs or desires.
What is scarcity?
The most desirable alternative given up for a decision.
What is the opportunity cost of a decision?
The line that shows different production possibilities for an economy.
What is the production possibilities frontier?
To show alternative ways to use an economy's resources.
What is the purpose of a production possibilities graph?
The use of fewer resources than an economy is capable of using.
What is underutilization?
Running a service that hires people to install sprinkler systems in lawns.
What makes someone an entrepreneur?
Paid effort that people devote to a task.
labor
The most arttractive alternative that is given up when an economic decision is reached.
opportunity cost
actions or activities that one person performs for another.
services
