Micro Econ 3

entrepreneurs

_____________ will enter the market and increase production

consumption possibilities curve

a curve showing the combinations of two goods that can be consumed when a nation specializes in the production of one good and trades with another nation

comparative advantage

ability to produce something at the lower opportunity cost

repetition, continuity, and innovation

adam smith noted 3 reasons for productivity to increase with specialization, with each worker performing a single production task

market economy

an economy in which people specialize and exchange goods and services in markets

pollution, public goods, imperfect information, and imperfect competition

causes of market failure

specialization

is beneficial if there are differences in opportunity costs because it increases the production of the group or society

safety net

market economies can be uncertain, so govt. provides a __________ that provides for citizens who experience bad economic outcomes

market failure

may occur when markets are unable to achieve the most efficient outcomes on their own

scarcity

prices provide signals about relative _______ of a product and help an economy respond to scarcity

production possibilities curve

represents the combinations of goods a country can produce using its own resources

contracts, insurance, patents, and accounting rules

social and government invention that make markets work better

government

the ________ establishes rules for exchange in markets and uses its police power to enforce rules. Their role is also to reduce economic uncertainty, and provide for people who experience job losses, poor health, etc

absolute advantage

the ability of one person or nation to produce a product at a lower resource cost than another person or nation

self interest

the decisions made in markets arise from the interactions of millions of people, each motivated by ____________

competition

the govt. also supports policies designed to foster __________ between firms

patent

the govt. enforces ______ laws to support innovation

contracts

the govt. helps to enforce contracts by maintaining a legal system that punishes people who violate _______

information

the govt. requires producers provide ________ to consumers about the features of their products, including warnings

true

true/false: Under a market system the people make the decisions about what to produce, and their decisions are guided by prices