Chapter 2 Review Module

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

Product markets

What are copyrights designed to accomplish?

Protect intellectual property rights

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor

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

all trading partners who specialize in goods where they have comparative advantage

In the circular flow model of the economy, __________ are the suppliers of goods and services.

firms

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

The role of the entrepreneur always involves:

taking risks

What is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property

A product produced in a foreign country and purchased by residents of the home country is called:

an import

In what type of economy does the government decide how most economic resources will be allocated?

Centrally planned economy

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources