Chapter 2 Flashcards

1
Q

Production possibilities frontier (PPF)

A

The boundary between those combinations of goods and services that can be produced and those that cannot.

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2
Q

Production efficiency

A

If we produce goods and services at the lowest possible cost.

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3
Q

Production efficiency on the production possibilities frontier

A
  • Production inside the PPF is ineffiecient because resources are either unused or misallocated
  • Production on the PPF is efficient.
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4
Q

Opportunity cost

A

The highest-value alternative forgone for that action to be taking place.

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5
Q

Opportunity cost as a ratio

A

The decrease in the quantity produced of one good divided by the increase in the quantity produced of another good.

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6
Q

Allocative efficiency

A

When goods and services are produced at the lowest possible cost AND in the quantities that provide the greatest possible benefit.

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7
Q

Marginal cost

A

The opportunity cost of producing one more unit of a good concerned.

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8
Q

Marginal benefit

A

The benefit received from consuming one more unit of a good concerned.

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9
Q

Marginal benefit curve

A

A curve that shows the relationship between the marginal benefit from a good and the quantity consumed of that good

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10
Q

Economic growth

A

The expansion of production possibilities

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11
Q

Technological change

A

The development of new goods and of better ways of producing goods and services.

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12
Q

Capital accumulation

A

The growth of capital resources, including human capital.

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13
Q

Comparative advantage

A

An advantage in an activity that a person can perform at a lower opportunity cost than anyone else.

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14
Q

Absolute advantage

A

An activity in which a person is more productive than others.

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15
Q

Firm

A

Economic unit that hires factors of production and organizes them to produce and sell goods and services.

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16
Q

Market

A

Any arrangement that enables buyers and sellers to get information and to do business with each other.

17
Q

Property rights.

A

The social arrangements that govern the ownership, use and disposal of anything that people value

18
Q

Real property

A

Includes land, buildings and durable goods such as plant and equipment

19
Q

Financial property

A

Stocks and bonds and money in the bank

20
Q

Intellectual property

A

the intangible product of creative effort.

21
Q

Money

A

Any commodity or token that is generally acceptable as a means of payment

22
Q

The production possibilities frontier

A

The boundary between production levels that are attainable and those that are not attainable when all the available resources are used to their limit.

23
Q

The opportunity cost of all goods increases as the production of the good…

A

increases

24
Q

Allocative efficiency

A

When goods and services are produced at the least possible cost and in the quantities that bring the greatest possible benefit.

25
Q

Resources are used efficiently when the marginal…

A

Marginal benefit = marginal cost

26
Q

The opportunity cost of economic growth

A

forgone current consumption

27
Q

The benefit of economic growth

A

increased future consumption