chapter 2

Bow-shaped PPF: OC of one unit of good___________ as more of good 1 is produced.

increases

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

increases as more of the good is produced

efficient PPF

is getting all it can from its resources (on arc)

One thing economists do to help them understand how the real world works is

make assumptions

Scientific method

observe formulate a theory collect and test data revising

Production possibilities frontiers are usually bowed outward. This is because

resources are specialized; that is, some are better at producing particular goods rather than other goods

circular flow diagram

shows how dollars flow through markets among household and firm

PPF

shows the combination of output that the economy can possibly produce given the available factors of production and the available production technology

Nominative statement

claims that attempt to describe how the world should be

Positive statement

claims that attempt to describe the word as it is

feasible combination

combination of inefficient and efficient PPF

inefficient PPF

does not use all resources ( inside arc)