Macroeconomics - Chapter 2

the invisible hand

Adam Smith, In Wealth of Nations, introduced the concept of _____________ which suggests selfish individual actions could possibility lead to a broader social good.

inefficient production points.

All points inside the production possibility frontier indicate:

Mexico specializes in the production of high-end cars, which it exports, and imports low-end cars that can be produced at lower cost elsewhere.

At one time, most of the cars produced in Mexico were sold in Mexico. Today, however, Mexico both exports and imports cars. How could comparative advantage explain this scenario?

the country can produce the product while forgoing fewer alternative products than any other country.

Economists generally believe that a country should specialize in the production of a good or service if:

the lost opportunity to buy ammunition

Every month Michael receives $45 to purchase ammunition and fishing equipment. What is the opportunity cost of allocating all $45 on fishing equipment?

UNSURE

Look at the above diagram. Let's assume that our economy is operating at full employment, and then employees in the computer industry are laid off. This change is portrayed in the movement from:

the economy operates at its productive capacity once it reaches Point B. the economy begins using its resources efficiently to produce both food and clothing. the economy increases production of both clothing and food.

Look at the above diagram. When the economy of a country moves from Point A to Point B:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Marginal thinking is best demonstrated by:

positive statements

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

its opportunity cost of producing the product, relative to other goods, is at least as low as in other countries.

The concept of comparative advantage says that a country will export a product only if

are added; will decline eventually

The law of diminishing returns states that as additional increments of resources ______________, the marginal benefit from those additional increments _______________.

the cost of haircuts received during the school term

The opportunity cost of attending university is likely to include all except which of the following?

as a person receives more of a good, the additional utility from each additional unit of the good declines

The principle of diminishing marginal utility states that __________ .

curved shape

The production possibilities frontier (PPF) has a ___________ because of the law of the diminishing returns.

Given available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good.

What conditions must be present for productive efficiency?

III only

What is the opportunity cost of owning a business?I. The economic profits that the business earnsII. The accounting profits that the business earnsIII. The profits that could be earned in another business using the same amount of resources

It is the combination of products that society most desires.

What is true of the product combination that satisfies allocative efficiency?

comparative advantage

When an entity can produce a good at a lower opportunity cost than another country, this is referred to as ________________.

ignore

When making a decision, rational people thinking at the margin will ___________ sunk costs.

Each point on the budget constraint represents a combination of two different goods whose total costs add up to the consumer's total budget.

Which of the following is a true statement about budget constraints?

Chris purchases a ticket for a movie but leaves halfway through because it is too scary.

Which of the following is an example of a sunk cost?

the additional utility that a consumer derives from consuming one additional unit of a good

Which of the following is the best definition of marginal utility?

allocative efficiency

Which type of efficiency is discussed in the following statement?The particular mix of goods a society produces represents the combination that society most desires.

oppurtunity cost

attending college is a case where the ______ exceeds the monetary cost