Chapter 2 terminology & notes

The shape of the PPF depends on whether O.C. are...

1. constant 2. increase as more of a good is produced

If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is...

A downward-sloping curve that is bowed outward

Law of increasing Opportunity Costs

As more of a good is produced, the opportunity costs of producing that good increases

Productive in-efficiency

Not using the full potential or "unemployed resources"

Productive efficient

The condition in which the maximum output is produced with the given resources and technology

Production Possibilities Frontier (PPF)

The possible combinations of two good than can be produced during a certain span of time

Comparative advantage

The situation in which someone can produce a good at lower opportunity cost than someone else can

Specialization

Utilizing all your comparative resources to produce the good in which you have C.A. (comparative adv.)

Decision making "at the margin" means making a choice based on __________________ of a decision

comparing the additional benefits and costs

The purpose of the ceteris paribus assumption is to allow economists to...

isolate the relationship between two variables