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)