Ch 2 - Confronting Scarcity: Choices In Production Flashcards
What kind of model is used to examine the nature of choices to produce more of some goods and less of others?
Production possibilities model
A set of rules that define how an economy’s resources are to be owned and how decisions about their use are to be made is called an…
Economic system
The resources available to an Economy for the production of goods and services are called
Factors of production
Utility is..,
The value or satisfaction that people derive from the goods and services they consume and the activities they pursue.
Human capital is…
The skills a worker has as a result of education, training, or experience that can be used in production
What is financial capital?
Money and other “paper” assets (such as sticks and bonds) that represent claims on future payments.
What is the formal definition of an entrepreneur?
A person who, operating within the context of a market economy, seeks to earn profits by finding ways to organize factors of production.
What is a production possibilities curve?
A graphical representation of the alternative combinations of goods and services an economy can produce.
An economy has a comparative advantage in producing a good or service if….
The opportunity cost of producing that good or service is lower than for any other.
What is the law of increasing opportunity cost?
The law holds that 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.
Full employment occurs when…
All the factors of production that are available for use under current mkt conditions are being utilized.
In the context of economics, when does efficient production occur?
When an economy is operating on its production possibilities curve.
In the context of economics, when does inefficient production occur?
When it is using the same quantities of factors of production but is operating inside it’s production possibilities curve.
What is specialization?
It implies that an economy is producing the goods and services in which it has a comparative advantage.
The process through which an economy achieves an outward shift in its production possibilities curve is called….
Economic growth.
