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.