Chapter 2 Flashcards
The production possibilities curve depicts the various combos of two goods that can be:
produced with increments in resources and changes in technology
On the production possibilities curve a movement between points that yields a loss of one good in order to raise the output of another good will maintain efficient production T or F
True
An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:
they must cut back their already meager consumptions levels to increase capital production
ralph wants to buy som milk and a box of cereal, if ralph buys 2 quarts of milk at $1 the box of cereal costs 75 cents if he buys 3 qts of milk at $1 per qt the box of cereal is free. for ralph the marginal cost of the third quart of milk is ….
25 cents
the production possibilities curve demonstrates the basic economic principle that:
to produce more of any one thing assuming full employment the economy must produce less of something else
investment in capital accumulation as well as investment in education and other labor productivity enhancing programs is necessary for economic growth T or F
True
The production possibility curve is bowed outward from the origin because of
the law of increasing opportunity costs
define marginal analysis
an examination of the effects of additions to or subtractions from a current situation
define opportunity cost
the best alternative sacrificed for a chosen alternative
what are the three basic fundamental economic questions
what products to produce
how will we produce it
whom to produce for
define production possibilities curve
a curve the shows the maximum combos of 2 outputs and economy can produce in a given period of time with its available resources and technology
what are the three basic assumptions that underlie the production possibilities curve model
fixed resources: the quantities and qualities of all resource inputs remain unchanged during the time period, fully employed resources : the economy operates with all its factors of production fully employed and producing the greatest output possible without waste or mismanagement, technology unchanged: holding existing technology fixed creates limits or constraints, on the amounts and types of goods any economy can produce
define technology
the body of knowledge applied to how goods are produced
what does scarcity do to a production possibilities curve
scarcity limits an economy to points on or below its production possibilities curve
T or F the production possibilities curve consists of all efficient output combos at which an economy can produce more of one good only by producing less of the other good
True
