Chapter 2 Flashcards
Allocating our resources to produce the kinds of goods and services we want the most
allocative efficiency
Increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output
diminishing marginal return
Using all of our resources in a technically and allocatively efficient manner
economic efficiency
An abstract description of a part of an economy. Simplifying assumptions are made, with a goal of understanding and explaining economic events
economic model
The cost of each additional unit of output increases because the opportunity cost of what could have been made with a unit of input increases
principle of increasing marginal costs
The opportunity cost of producing one additional unit of output
marginal cost
An economic model showing possible combinations of outputs, given resources and technology
production possibilities frontier
Using methods to produce goods and services that minimize costs of producing or maximize output given our inputs
technical efficiency
what does “marginal” actually mean in econ terms in “diminishing marginal return”?
additional
A ___ compares the input to the output on a graph, while a ___ compares output 1 to output 2
production curve; production possibilities frontier
The economy is using ALL of its available resources – including labor, capital and land
technical efficiency
“It is not possible to make one person better off without making someone else worse off” is what? and falls under which category?
“Pareto Efficiency”; technical efficiency
What would happen to a PPF if one of the outputs became much more efficient to produce?
The PPF would rotate outward along the axis with that output
Jane makes 10 birdhouses in an hour, after working a second hour, she has a total of 15 birdhouses. What is the marginal product of her second hour?
5 birdhouses
Mary spends all her money buying her mom, dad, and brother college coffee mugs for Christmas. Her dad does not drink coffee. Mary is ___ efficient but not ___ efficient
Technically efficient but not allocatively efficient
An action contributes to economic efficiency if the cost of an action is ___
less than the benefits
If the economy is producing at a point inside the production possibilities frontier, which of the following must be true?
- All resources are employed
- The economy is as well off as it can be given its limited resources
- That point is unobtainable
- More of both goods can be produced
More of both goods can be produced
Makes simplifying assumptions to provide a simpler version of a complex problem so that it may be studied and understood
economic model
When parents say, “My child is very intelligent, but he just doesn’t try. My child would rather play video games than study.” The child is _______.
Allocatively efficient, but not technically efficient
Increasing marginal cost is a direct result of __________.
diminishing marginal returns
