Chap 3

Question 1

What is the production process?

Answer 1

inputs —> outputs

Question 2

What are the consumable outputs?

Answer 2

goods and services

Question 3

What are the four resources/inputs?

Answer 3

Natural Resources, Labor, Capital, Entrepreneurship

Question 4

What are natural resources (chart)?

Answer 4

tangible but not produced by anybody

Question 5

What is labor (chart)?

Answer 5

physical and mental talents applied to production

Question 6

What is capital (chart)?

Answer 6

produced means of production

Question 7

What is entrepreneurship (chart)?

Answer 7

risk taking and innovation

Question 8

What is the price of natural resources?

Answer 8

rent

Question 9

What is the price of labor?

Answer 9

wage

Question 10

What is the price of capital?

Answer 10

interest

Question 11

What is the price of entrepreneurship?

Answer 11

profit

Question 12

Do middlemen change the value of the product?

Answer 12

Yes, (value=willingness to sacrifice or pay) without them we would not have the product and we value their labor

Question 13

What is technology?

Answer 13

Inputs plus Outputs

Question 14

What is make work fallacy?

Answer 14

the idea that jobs are valuable

Question 15

PPF is…

Answer 15

the Production Possibilities Frontier

Question 16

What does the PPF assume?

Answer 16

1. fixed resources 2. two good produced over some period of time 3. a given technology

Question 17

In PPF when has economic growth occured?

Answer 17

when the economy has better/more efficient technologies

Question 18

On the PPF for coconuts and fish, what is the best combination?

Answer 18

we can’t know because the PPF only shows possibilities

Question 19

If the cost of one good in terms of another good rises, the PPF

Answer 19

bows outwards

Question 20

What do income and wealth depend on (3)?

Answer 20

1. quantity of resources 2. quality of resources 3. freedom to use resources

Question 21

How do people upgrade their labor?

Answer 21

human capital