Chapter 2 - The Economic Problem: Scarcity and Choice Flashcards

1
Q

Capital

A

Things that are produced and then used in the production of other goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

factors of production (or factors)

A

The inputs into the process of production. Another term for resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

production

A

The process that transforms scarce resources into useful goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

inputs or resources

A

Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

outputs

A

Goods and services of value to households.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Opportunity Cost

A

The best alternative that we give up, or forgo, when we make a choice or decision.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

theory of comparative advantage

A

Ricardo’s theory that specialization and free trade will benefit all trading parties, even those that may be “absolutely” more efficient producers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Absolute advantage

A

A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

comparative advantage

A

A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Consumer goods

A

Goods produced for present consumption.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Investment

A

The process of using resources to produce

new capital.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

production possibility frontier (ppf )

A

A graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

marginal rate of transformation (MRT)

A

The slope of the production possibility frontier (ppf ).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Economic growth

A

An increase in the total output of an economy. It occurs when a society acquires new resources or when it learns to produce more using existing resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

command economy

A

An economy in which a central government either directly or indirectly sets output targets, incomes, and prices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

laissez-faire economy

A

Literally from the French: “allow [them] to do.” An economy in which individual people and firms pursue their own self-interest without any central direction or regulation.

17
Q

market

A

The institution through which buyers and sellers interact and engage in exchange.

18
Q

consumer sovereignty

A

The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase).

19
Q

Free enterprise

A

The freedom of individuals to start and operate private businesses in search of profits.