Chapter 1

Question 1

Production Possibilities Frontiers

Answer 1

A curve showing the different combinations of goods that can be produced with the available resources and current technology.

Question 2

Comparative advantage

Answer 2

Exists if someone can produce a good at a lower opportunity cost than someone else

Question 3

Trade

Answer 3

The act of buying and selling

Question 4

Absolute advantage

Answer 4

The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources.

Question 5

What are the two key groups in modern economy

Answer 5

Households and firms

Question 6

households

Answer 6

Individuals who provide the factors of production: labour, capital, natural resources and other inputs used to make goods and services.

Question 7

Firms

Answer 7

Supply goods and services to product markets; households buy these products from the firms.

Question 8

Factors of production

Answer 8

Labour
Capital
Natural resources
Entrepreneurr