Chapter 2

In the production possibilities model, the opportunity cost of a good is:

The amount of other goods that must be given up in order to produce it

points on a production possibilities frontier indicate ___________

efficiency

points inside a production possibilities frontier indicate __________

inefficency

In the production possibilities model, economic growth can result from _____________

technological improvements

a decentralized system comprised of many buyers and sellers each attempting to maximize their own gain under competitive conditions best describes:

the market system

A production possibilities frontier is drawn assuming all of the following EXCEPT:

the technology used in production is constant

scarcity forces a society to address all of the following fundamental economic questions EXCEPT:

what is the best way to maintain full employment?

most economic systems address the issues of what to produce, how to produce, and who gets to consume output with

a combination of market and government decisions

In the production possibilities model, economic growth can result from

an increase in capital stock

which of the following will cause a movement from a point inside an economy's production possibilities frontier (PPF) to a point on its PPF?

an increase in the efficiency with the resources are used

A straight line production possibilities frontier implies that opportunity cost is ________

constant

an outward shift of the production possibilities frontier illustrates ___________

economic growth

the major macroeconomic policy goals of most industrialized nations are

full employment, price stability, and economic growth

a laissez-faire approach to policy involves

government allowing economic problems to self correct

in a command, or socialist, system:

government planning boards may set output targets

all of the following are essential elements of capitalism EXCEPT:

government-owned resources

a mixed economy

has elements of both a planned and a market system

production possibilities frontiers (curves):

illustrate the limits to what can be produced from current resources and technology

WHich of the following statements are false

in a command economy, the role of government is small or even nonexistent

production possibilities frontiers that bow outward illustrate _____________ opportunity cost.

increasing

points inside a production possibilities frontier imply that:

production is inefficient or resources are unemployed.

in a market economy, _________ motivates producers to choose the most efficient means of production.

profit