Chapter 2: Trade-offs, Comparative Advantage, and Market System

Question 1

Production Possibilities Frontier

Answer 1

A curve showing the maximum attainable combinations of two products that may be produced with available resources ad current technology

Question 2

Economic Growth

Answer 2

The ability of an economy to produce increasing quantities of goods and services

Question 3

Trade

Answer 3

The act of buying and selling

Question 4

Absolutes advantage

Answer 4

The ability of an individual, a firm, or a country to produce more of a good or service than potential trading partners, using the same amount of resources

Question 5

Comparative Advantage

Answer 5

The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than potential trading partners

Question 6

Market

Answer 6

A group of buyers and sellers of a good or service and the institutions or arrangements by which they come together to trade

Question 7

Product Markets

Answer 7

A market for goods

Question 8

Factor Market

Answer 8

A market for the factors of production

Question 9

Factors of production

Answer 9

• Labor
• Capital
• Natural resources
• Entrepreneur

Question 10

Entrepreneurial ability

Answer 10

The ability to bring the other factors of production together to successfully produce and sell goods and services