ECON Chapter 2

When an economy appears to be guided by an invisible hand, ______.

no government intervention is required to coordinate production

If each country focuses on producing the good for which it has a comparative advantage, the country would

specialize in production of that good.

When people _______ and trade, everyone gets more of the things they want.

specilize

When specialized producers exchange goods and services, outcomes improve because of

gains from trade

Points along the production possibilities frontier are attainable and

efficient

True or false: Points inside the production possibilities frontier are achievable, but still make full use of all available resources.

False

The production possibilities frontier shows

all the possible combinations of two outputs that can be produced using all available resources

The two main factors that drive the change in U.S. production possibilities are

changes in technology. the number of workers.

Geographic shifts in the production of clothing has occurred, in large part, because of lower relative

cost

The first question economists use to break down problems—"What are the wants and constraints of those involved?"—can be answered using the

production possibilities frontier.

In the nineteenth century, the United States snatched the comparative advantage in clothing

through a combination of new technology and cheap labor.

When a country specializes, in order to have all the goods they want to consume, they must

trade

If each country focuses on producing the good for which it has a comparative advantage, total production

increases

The opportunity cost of producing one good in terms of the other typically _________ as more of a good is produced, because skills vary among workers.

increases

Points _________the production possibilities frontier are inefficient while points ________ the production possibilities frontier are efficient.

inside, along

When the production possibilities frontier is concave,

opportunity costs are increasing.

Points that lie _______ (one word) the production possibilities frontier are unattainable.

outside

The production possibilities frontier shows the ______.

production constraint of two outputs that can be produced using all available resources

The production possibilities frontier helps us answer economists' second question "What are the trade-offs?" because

there is a trade-off between the production of the two goods.

Without trade, points that lie outside the production possibilities frontier are

unattainable

Gains from trade are realized if

countries specialize in the good for which they have a comparative advantage and then trade with each other

When opportunity costs are increasing, the production possibilities frontier is:

a concave curve.

A producer has a comparative advantage when they can produce

a good at a lower opportunity cost.

If a producer can generate more output than others with a given amount of resources, that producer has a(n) _________ advantage.

absolute

How does the production possibilities frontier help us answer economists' second question, "What are the trade-offs?"

Along the PPF, in order to get more of one thing, you must give up some of another thing.

Points inside the production possibilities frontier are

achievable, but don't make full use of all available resources.

The production possibilities frontier shows all the possible combinations of outputs that can be produced using

all available resources

The production possibilities frontier helps us answer economists' first question—"What are the wants and constraints of those involved?"—because it shows

all possible combinations of outputs that can be produced with ideal resources.

When individuals seek to make a profit and specialize according to their comparative advantage, we could say that the system operates as though there was

an invisible hand.

A country has a(n) ________ advantage over another country if it can make a product at a lower opportunity cost than another country

comparative

The production possibilities frontier gives us a way to represent the __________ on production

constraints

When countries specialize in the good for which they have a comparative advantage and then trade with each other,

gains from trade are realized

When a producer has an absolute advantage they can

generate more output than others with a given amount of resources.

Assume that all workers cannot produce the same amount of each good. The opportunity cost of producing one good in terms of the other

increases as more of a good is produced, because skills vary among workers.

A problem with specialization is that each producer may end up with only _______ good

one

The _________ cost of one good is the amount of the other good that must be given up to produce it.

opportunity

Points on the production possibilities frontier are efficient because

that combination of two outputs can be produced using all available resources.

The opportunity cost of one good is

the amount of the other good that must be given up.