Chaperr 3

Question 1

Production possibilities frontier

Answer 1

Shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

Question 2

Production efficiency

Answer 2

No way to produce more of one good without producing less of some other good

Question 3

Opportunity cost

Answer 3

The loss of potential gain from other alternatives when one alternative is chosen

Question 4

Economic growth

Answer 4

The expansion of production possibilities and increase in standard of living

Question 5

What 2 factors influence economic growth?

Answer 5

1. Technological change (developing more efficient ways to produce)
2. Capital accumulation (including human capital)

Question 6

Gains from trade

Answer 6

Mutual gains that individuals can achieve from specializing in doing different things and trading with one another

Question 7

ABSOLUTE ADVANTAGE

Answer 7

PERSON/NATION CAN PRODUCE MORE GOOD WITH A GIVEN AMOUNT OF RESOURCES THAN ANOTHER PERSON CAN (more productive)

Question 8

COMPARATIVE ADVANTAGE

Answer 8

PERSON/NATION AT A LOWER OPPORTUNITY COST

Question 9

Productivity equation

Answer 9

Output/input

Question 10

Absolute advantage

Answer 10

Ability to produce more/better goods and services than somebody else (using the same amount of resources)