Chapter 2

Question 1

production possibility table

Answer 1

a table that lists the trade-offs between two choices

Question 2

production possibility curve

Answer 2

a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs

Question 3

comparative advantage

Answer 3

some resources are better suited to the production of one good than to the production of another good

Question 4

productive efficiency

Answer 4

achieving as much output as possible from a given amount of inputs or resources

Question 5

inefficiency

Answer 5

getting less output from inputs that, if devoted to some other activity, would produce more output

Question 6

laissez-faire

Answer 6

• an economic policy of leaving coordination of individuals’ actions to the market
• means “an economic policy of leaving coordination of individuals’ actions to the market

Question 7

globalization

Answer 7

the increasing integration of economies, cultures, and institutions across the world

Question 8

law of one price

Answer 8

the wages of workers in one country will not differ significantly from the wages of (equal) workers in another institutionally similar country