Ch2 Micro Econ OSU

Total Revenue

the amount a firm receives from selling its product, or the quantity sold, multiplied by the price. Rectangle area = Base x height

Percentage change

(value in second period - value in first period) / ---------------------------------------------------------------- value in first period

Circular-Flow Diagram

A model that illustrates how participants are linked in markets

Increasing Marginal Opportunity Costs

AS the economy moves down the PPF, it experiences marginal opportunity costs because increasing production by a given quantity requires larger and larger production.

All of the following countries come close to the free market benchmark except a) Germany. b) North Korea. c) Canada. d) Singapore.

All of the following countries come close to the free market benchmark except b) North Korea

Production Possibility Frontier (PPF)

Curve showing max attainable combinations of two products that may be purchases with available resources and current technology -positive tool -Analyzing opportunity costs and trade-offs *** What can be produced, NOT what should***

In the circular flow model, producers a) spend earnings from resource sales on goods and services in the product market. b) hire resources sold by households in the factor market. c) sell goods and services in the input market. d) and households spend earnings from resource sales on goods and services in the factor market.

In the circular flow model, producers b) hire resources sold by households in the factor market.

Increasing opportunity cost is represented by a ________ production possibilities frontier. a) vertical b) bowed out c) bowed in d) linear

Increasing opportunity cost is represented by a ________ production possibilities frontier. b) bowed out

Production Market

Markets for goods ( ie:computers), or services ( ie: health care)

Factor Markets

Markets of production - Labor - Capital - Natural resources - entrepreneurial ability

Free Market

One with few government restrictions on how G/S can be produced or sold, or how a factor of production can be employed. *Countries that have come close to Free Market benchmarks have been most successful than centrally planned

Invisible Hand

Produce what people want Allows individual responses to collectively end up satisfying the wants of consumers

Scarcity

Scarcity requires trade-offs. Exists because we have unlimited wants but only limited resources available to fulfill those wants.

Entrepreneur

Someone who brings together factors of production - Land - Labor - Capital To produce a G/S

Economic Growth

The ability of an economy to increase the production of goods and services. **Shifts in the PPF represent econ growth** Outward shifts (raising the standard of living)

Comparative Advantage

The ability of an individual, firm or country to produce a good at a lower opportunity cost than competitors, using the same amount of resources.

Ablsolute Advantage

The ability of an individual, firm or country to produce more of a good or service than competitors, using the same amount of resources.

Factors of Prduction

The inputs used to make goods and services - Labor - Capital - Natural resources - entrepreneurial ability

The points outside the production possibilities frontier are: a) unattainable b) inefficient c) efficient d) attainable

The points outside the production possibilities frontier are: c) efficient

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources. a) maximum attainable b) equitable c) minimum attainable d) only

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources. a) maximum attainable

Property Rights

The rights individuals or firms have to exclusive use if their property including the right to buy or sell it

Without an increase in the supplies of factors of production, how can a nation achieve economic growth? a) by increasing the prices of factors of production b) through technological advancement which enables more output with the same quantity of resources c) by producing more high-value goods and less of low-value goods d) by lowering the prices of factors of production

Without an increase in the supplies of factors of production, how can a nation achieve economic growth? b) through technological advancement which enables more output with the same quantity of resources

Serena 8 Bracelets 16 Necklaces Haley 9 Bracelets 12 Necklaces Refer to Table. What is Haley's opportunity cost of making a necklace? a) 3/4 of a bracelet b) 1 1/3 necklaces c) 3 bracelets d) 2 necklaces

a) 3/4 of a bracelet

Tesla Motors manufacturers its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla: a) faced a trade-off between higher cost and lower precision. b) faced no trade-offs because employing more technically-skilled workers increased efficiency. c) eroded some of its competitiveness in the luxury electric car market because of its increased cost of production. d) adopted a negative technological change because it chose high-skilled workers over low-paid workers.

a) faced a trade-off between higher cost and lower precision.

"An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by a) Alfred Marshall. b) Adam Smith. c) John Maynard Keynes. d) Karl Marx.

b) Adam Smith.

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries? a) France has the comparative advantage in wine and cheese. b) Italy has the comparative advantage in wine. c) France has the comparative advantage in wine. d) Italy has the comparative advantage in cheese.

b) Italy has the comparative advantage in wine.

Which of the following is not a factor of production? a) a drill press in a machine shop b) the manager of the local tire shop c) $1,000 in cash d) an acre of farmland

c) $1,000 in cash

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties? a) 35 bow ties b) 2 bow ties c) 15 bow ties d) 20 bow ties

c) 15 bow ties

Serena 8 Bracelets 16 Necklaces Haley 9 Bracelets 12 Necklaces Refer to Table. Which of the following statements is true? a) Serena has an absolute advantage in making both products. b) Haley has an absolute advantage in making both products. c) Haley has an absolute advantage in making bracelets and Serena in making necklaces. d) Haley has an absolute advantage in making necklaces and Serena in making bracelets.

c) Haley has an absolute advantage in making bracelets and Serena in making necklaces.

The production possibilities frontier model shows that a) a market economy is more efficient in producing goods and services than is a centrally planned economy. b) economic growth can only be achieved by free market economies. c) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. d) if consumers decide to buy more of a product its price will increase.

c) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The resource income earned by those who supply ________ is called wages. a) capital b) natural resources c) labor d) entrepreneurship

c) labor

If opportunity costs are constant, the production possibilities frontier would be graphed as a) a positively sloped straight line. b) a negatively sloped curve bowed in toward the origin. c) a ray from the origin. d) a negatively sloped straight line.

d) a negatively sloped straight line.

Comparative advantage means the ability to produce a good or service a) of a higher quality than any other producer. b) at a higher profit level than any other producer. c) at a lower selling price than any other producer. d) at a lower opportunity cost than any other producer.

d) at a lower opportunity cost than any other producer.

Market System

production market, factor market, factors of production