Chapter 2

Question 0

Production

Answer 0

any activity that results in the conversion of resources into products that can be used in consumption

Question 1

Scarcity

Answer 1

A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants

Question 2

Land

Answer 2

The natural resources that are available from nature. Land as a resource includes location, original fertility and mineral deposits, topography, climate, water and vegetation.

Question 3

Labor

Answer 3

Productive contributions of humans who work, involving both mental and physical activities

Question 4

Physical capital

Answer 4

All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production

Question 5

Human capital

Answer 5

The accumulated training and education of workers

Question 6

Entrepreneurship

Answer 6

The component of human resources that performs the functions of raising capital, organizing, managing, and assembling other factors of production, making basic business policy decisions, and taking risks

Question 7

Goods

Answer 7

All things from which individuals derive satisfaction or happiness

Question 8

Economic goods

Answer 8

Goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price

Question 9

Services

Answer 9

Mental or physical labor or help purchased consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, house cleaners, educators, retailers, and wholesales; items purchased or used by consumers that do not have physical characteristics

Question 10

Opportunity cost

Answer 10

The highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want

Question 11

Production possibilities curve (PPC)

Answer 11

A curve representing all possible combinations of maximum outputs that could be produced assuming a fixed amount of productive resources of a given quality

Question 12

Technology

Answer 12

Society’s pool of applied knowledge concerning how goods and services can be produced

Question 13

Efficiency

Answer 13

The case in which a given level of inputs is used to produce the maximum output possible. Alternatively, the situation in which a given output is produced at minimum cost

Question 14

Inefficient point

Answer 14

Any point below the production possibilities curve at which the use of resources is not generating the maximum possible output

Question 15

Law of increasing relative cost

Answer 15

The fact that the opportunity cost of additional units of a good generally increases as society attempts to produce more of that good. This accounts for the bowed-out shape of the production possibilities curve

Question 16

Consumption

Answer 16

The use of goods and services for personal satisfaction

Question 17

Specialization

Answer 17

The organization of economic activity so that what each person (or region) consumers is not identical to what that person (or region) products. An individual may specialize, for example, in law or medicine. A nation may specialize in the production of coffee, computers, or cameras

Question 18

Comparative advantage

Answer 18

Other ability to produce a good or service at a lower opportunity cost compared to other producers

Question 19

Absolute advantage

Answer 19

The ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, the ability to produce the same quantity of a good or service using fewer units labor or resource inputs.

Question 20

Division of labor

Answer 20

The segregation of are source into different specific tasks; for example, one automobile worker puts on bumpers, another doors, and so on