ECON Ch 2

In the circular flow model of the economy, __________ are the suppliers of goods and services.

Firms

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity Cost

What are copyrights designed to accomplish?

Protects intellectual Property rights

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor

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

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:

a technological advance that affects both the production of automobiles and aircraft carriers

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have competitive advantage

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

an absolute advantage in both jobs

In the United States, property rights

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

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

Who receives the goods and services produced in the United States depends largely on

how income is distributed

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

import

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

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

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

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 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

Contracts, insurance, patents and accounting rules are:

social and government invention that make markets work better

The role of the entrepreneur always involves:

taking risks