Chapter 2

Question 1

Allocating our resources to produce the kinds of goods and services we want the most

Answer 1

allocative efficiency

Question 2

Increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output

Answer 2

diminishing marginal return

Question 3

Using all of our resources in a technically and allocatively efficient manner

Answer 3

economic efficiency

Question 4

An abstract description of a part of an economy. Simplifying assumptions are made, with a goal of understanding and explaining economic events

Answer 4

economic model

Question 5

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

Answer 5

principle of increasing marginal costs

Question 6

The opportunity cost of producing one additional unit of output

Answer 6

marginal cost

Question 7

An economic model showing possible combinations of outputs, given resources and technology

Answer 7

production possibilities frontier

Question 8

Using methods to produce goods and services that minimize costs of producing or maximize output given our inputs

Answer 8

technical efficiency

Question 9

what does “marginal” actually mean in econ terms in “diminishing marginal return”?

Answer 9

additional

Question 10

A ___ compares the input to the output on a graph, while a ___ compares output 1 to output 2

Answer 10

production curve; production possibilities frontier

Question 11

The economy is using ALL of its available resources – including labor, capital and land

Answer 11

technical efficiency

Question 12

“It is not possible to make one person better off without making someone else worse off” is what? and falls under which category?

Answer 12

“Pareto Efficiency”; technical efficiency

Question 13

What would happen to a PPF if one of the outputs became much more efficient to produce?

Answer 13

The PPF would rotate outward along the axis with that output

Question 14

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?

Answer 14

5 birdhouses

Question 15

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

Answer 15

Technically efficient but not allocatively efficient

Question 16

An action contributes to economic efficiency if the cost of an action is ___

Answer 16

less than the benefits

Question 17

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

Answer 17

More of both goods can be produced

Question 18

Makes simplifying assumptions to provide a simpler version of a complex problem so that it may be studied and understood

Answer 18

economic model

Question 19

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 _______.

Answer 19

Allocatively efficient, but not technically efficient

Question 20

Increasing marginal cost is a direct result of __________.

Answer 20

diminishing marginal returns