Chapter 3: The Economic Problem

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

A absolute advantage in both jobs

Which of these will cause the quantity of goods and services that can be produced by one worker, in one hour of work, to increase?

A technological change

One factor that can increase the productive output from labor is:

Additional training

Countries gain from specializing in producing goods in which they have a(n) ___ advantage and trading for goods in which other countries have a(n) ___ advantage.

Comparative, comparative

All points that plot on the production possibilities frontier represent combinations of goods and services that are ___.

Consuming all available resources and technology

If the production possibilities frontier makes a parallel shift outward this indicates ___.

Economic growth

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

One opportunity cost of attending college is the:

Lost wages while going to school

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

Opportunity cost

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

Overall standards of living increase

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the ___ the payoff to devoting additional resources to that activity.

Smaller

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

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

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage in picking apples

Which of these factors would expand the production possibilities frontier?

A more educated labor force

When an economy moves from one point to another on the PPF it means the ___.

Combination of goods and services produced has changed

When an economy cannot produce more of one good or service without reducing the production of another good or service it is said to be ___.

Productively efficient

When a student elects to study economics an additional 10 hours per week they are forced to give up 10 hours in leisure or work. This illustrates the concept of ___.

Tradeoffs