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