CH 2

Question 1

Factors of production

Answer 1

The resources available to the economy for the production of goods and services

Question 2

Utility

Answer 2

The value, or satisfaction, that people derive from the goods and services they consume and the activities they pursue

Question 3

Labor

Answer 3

The human effort used to produce a good

Question 4

Capital

Answer 4

Something that is used to produce a good (basically a tool)

Question 5

Natural Resources

Answer 5

Resources from nature used to make a good

Question 6

Human capital

Answer 6

The skills a worker has as a result of education, training, or experience that can be used in production

Question 7

Financial Capital

Answer 7

Includes money and other “paper” assets (such as sticks and bonds) that represent claims on future payments

Question 8

Technology

Answer 8

The knowledge that can be applied to the production of goods and services

Question 9

Entrepreneur

Answer 9

A person who, operating within the context of a market economy, seeks to earn profits by finding new ways to organize factors of production

Question 10

Firm

Answer 10

A company that combines factors of production to produce goods

Question 11

Sole Proprietorship

Answer 11

A firm owned by one individual

Question 12

Partnership

Answer 12

A firm owned by several individuals

Question 13

Corporation

Answer 13

A firm owned by shareholders who own stock in a firm

Question 14

Production Possibilities Curve

Answer 14

A graph used to represent the different options of goods an economy can produce

Question 15

Comparative Advantage

Answer 15

In producing a good or service, the situation that occurs if the opportunity cost of producing that good or service is lower for that economy than for any other

Question 16

Law of Increasing Opportunity Cost

Answer 16

As an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will increase

Question 17

Full Employment

Answer 17

The full use of factors of production

Question 18

Efficient Production

Answer 18

When an economy is operating on its production possibilities curve

Question 19

Inefficient Production

Answer 19

Utilizes factors of production wrong by sacrificing more opportunity cost (functions INSIDE the curve)

Question 20

Specialization

Answer 20

When an economy is producing goods at a comparative advantage

Question 21

Economic Growth

Answer 21

The growth of an economy, causing a shift in the production possibilities curve

Question 22

What can result in Economic Growth?

Answer 22

Increase in physical quantity, increase in quality of factors of production, or technological gain

Question 23

Market Capitalist Economy

Answer 23

Resources are generally owned by private individuals who have the power to make decisions about their use (U.S, U.K, Chile, Hong Kong)

Question 24

Command Socialist Economy

Answer 24

The government is the primary owner of capital and natural resources and has broad power to allocate the use of factors of production (North Korea, Cuba)

Question 25

Mixed economies

Answer 25

Combines aspects of market capitalist and of command socialist economic systems (France, Germany, Sweden)