EC350 Chapter 2

Factor Market

a market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability

In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?

4 cakes & 7 pies. Would be above the PPF

What is the principle of marginal opportunity cost?

It states that the more resources devoted to any activity, the smaller the payoff to devoting additional resources to that activity.

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

The production possibilities frontier will shift outward

if resources are used to produce capital goods

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

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

Product Market

a market for goods - such as computers - or services - such as medical treatment