Chapter 3

Question 1

production process

Answer 1

turns inputs into consumable outputs

Question 2

consumable outputs

Answer 2

are goods and services

Question 3

resources/inputs

Answer 3

Natural Resources/land- Cost =rent
Labor..C=Wage
Capital…C=Interest
Entrepreneurship…C= profit

Question 4

Technology

Answer 4

the way that inputs are combined to produce output. We often think of technology as being associated with computers and satellites, but our definition is simpler than that, including other, basic things.

Question 5

make work fallacy

Answer 5

The idea that jobs are valuable, whether or not the labor’s production adds value

Question 6

law of increasing opportunity cost (LIOC)

Answer 6

is a principle that states that once all factors of production (land, labor, capital) are at maximum output and efficiency, producing more will cost more than average. As production increases, the opportunity cost does as well.

Question 7

economic growth

Answer 7

an increase in the amount of goods and services produced per head of the population over a period of time.

Question 8

human capital

Answer 8

Individuals upgrade their labor by education and training—developing their human capital. Individuals can save some of their income and build their physical capital as well—buying “the produced means of production” from someone else.

Question 9

invisible hand

Answer 9

A term used by Adam Smith to describe his belief that individuals seeking their economic self-interest actually benefit society more than they would if they tried to benefit society directly.