Micro Ch 2

Production efficiency is described as

goods and services are being produced at their lowest resource cost

what is one of the risks involved in complete specialization?

Specialization in agricultural products can lead to devastation due to the vagaries of the weather. Educational opportunities may be narrowed. Living standards may decrease.

A change from an inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a:

movement from inside the PPF onto the PPF

A country's GDP is inside the frontier of the production possibility frontier. This could happen because of:

a recession

Two countries will benefit from trade if

each country has a lower opportunity cost of producing the traded good. each country has an absolute advantage of producing the good. one country does not produce the traded good.

If a producer has a comparative advantage, then she has selected the activity that:

has the lowest opportunity cost. does not require specialization

A country operating outside of the production possibilities frontier is

impossible. A country cannot operate outside the production possibilities frontier.

According to the OECD, which of the following will lead to increase in the per capita GDP?

increased business investment

A country operating inside of the production possibilities frontier is operating:

inefficiently but in an area that can be attained. in the unattainable region

the law of comparative advantage suggests that

nations can benefit if they trade with each other. Free trade among nations is generally harmful to an economy. each country should strive to be self-sufficient.

Absolute advantage is defined as:

one country can produce more of a good than another country

Full employment on a PPF is shown by

points along the frontier of the PPF. points outside the PPF, an inefficient use of resources

Economic growth is shown as a:

shift to the right in the PPF, shift to the left in the PPF, movement up and down along the PPF

An increase in technology:

shifts the PPF curve outward, shifts the ppf curve inward, creates unemployment, decreases inflation

one of the drivers of economic growth is

specialization, consumption, international trade

Dave Ricardo

suggested that countries would benefit from trade. suggested that goods were exchanged based of the value of those in use.

planned economies rely heavily on ___ to make most economic decisions

the central government, consumers, producers

A country can use its given resources to produce capital goods or consumer goods. This implies that:

there is a tradeoff between the current and the future standard of living.

All of the following are considered human capital, EXCEPT:

working in a factory