ECON chapter 2

A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

Production Possibilities Frontier (PPF)

what are copyrights designed to accomplish?

Protect intellectual property rights

which of the following is critical to the success of the market system?

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

a shift in a curve that isn't connected at a point is caused by

a technological advance that affects both productions of the two products

in the united states, property rights:

are guaranteed by two amendments to the U.S. Constitution

Households provide _______ to the factor market? a. Finished goods and services b. Income c. Factors of production d. All of the above

c. Factors of production

individuals and firms are better off if the specialize in producing goods and services for which they have a ______________

comparative advantage (lower opportunity cost) and obtain the other goods/services they need through trade

what is the basis for trade?

comparative advantage, not absolute advantage

the ability of the economy to increase the production of goods and services

economic growth

Firms pay money to households for

factors of production

Households pay money to firms for

goods and services

Contracts, insurance, patents and accounting rules are:

inventions that make a market work better

the role of a entrepreneur always imvolves

taking risks

What is an export?

Goods and Services sold to other countries

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

households provide what to firms?

factors of production

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

why are opportunity costs not always constant and often increasing?

some resources are better suited to one task than another

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

an absolute advantage in both jobs

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

an import

in a circular flow model of the economy, _______________ are the suppliers of goods and services

firms

A market with few government restrictions on how a good or service can be produced or sold or how a factor of production can be employed.

free market

firms provide what to households?

goods and services

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

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):

invisible hand

if prices are ______________ the collective actions of self-interested agents signals the relative worth of goods/services (invisible hand)

invisible hand

factor market

market in which firms purchase the factors of production from households

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

in a free market, all individual act on their what?

own rational self interest

absolute advantage is the ability of an individual/firm/country to

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

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

product markets

as more economic resources come available, the economy can achieve

production combinations that were previously unattainable

Shifts in the production possibilities frontier

represent economic growth and decline

specialization increased productivity. what was the cause of this phenomenon?

the division of labor

the slope of a production possibility curve represents the

the opportunity cost of producing one more unit of a good in terms of the forgone production of the other good

opportunity cost equation

what you give up/what you gain

the act of buying and selling

trade