Economics chapter 2

Question 0

Any activity that results in the conversion of resources into products that can be used in consumption.

Answer 0

Production

Question 1

A situation in which ingredients for producing the things that people desire are insufficient to satisfy all wants at a zero price.

Answer 1

Scarcity

Question 2

In a world of —— satisfaction of one want means nonsatisfaction of one or more other wants

Answer 2

Scarcity

Question 3

———are unlimited; they include all material desires and all no material desires, such as love, faction, power, and prestige.

Answer 3

Wants

Question 4

The concept of ——-is difficult to define objectively for every person; consequently, we simply consider every person’s wants to be unlimited. In a world of scarcity, satisfaction of one want necessarily means nonsatisfaction of one or more other wants.

Answer 4

Need

Question 5

List the scarce resources we use to produce economic goods. Goods that are desired but are not directly obtainable from nature to the extent demanded or desired at a zero price.

Answer 5

Land, labor, physical, human capital

Question 6

——–is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available.

Answer 6

Scarcity

Question 7

The highest valued, next best alternative that must be sacrificed to obtain something or to satisfy a want.

Answer 7

Opportunity cost

Question 8

Cost is always what is economics?

Answer 8

A foregone opportunity

Question 9

A curve representing all possible combinations of maximum outputs That could be produced assuming a fixed amount of productive resources of a given quality.—graphical illustration of the trade offs that occur and choices made in production of goods and services. Help us see trade offs between two different goods and services. Opportunity costs

Answer 9

Production possibilities curve PPC

Question 10

Something that can change over time

Answer 10

Variable

Question 11

Can produce more outputs with the same inputs or produce the arame outputs with fewer inputs—simply being better at it

Answer 11

Absolute advantage

Question 12

Focuses on more efficient allocation of inputs relative to the opportunity costs associated with how others allocate comparable inputs. This makes the economy become more efficient— I can do things with fewer opportunity costs

Answer 12

Comparative advantage

Question 13

Why do we use models?

Answer 13

To organize thoughts and narrow problems down so they are manageable and easy to understand.

Question 14

The application of statistical methods to the testing of economic models

Answer 14

Empirical economics

Question 15

There are four assumptions that are crucial to interpretation of PPC:

Answer 15

1. All resources are fully employed
2. A snapshot look -specific point in time
3. Quantities of inputs are fixed
4. Technology does not change

Question 16

The fact that the PPC is downward sloping shows that there is a trade off for opportunity cost which occurs due to scarcity– the more we produce of a good, the opportunity cost of that good generally increases. Reason slope is bowed out

Answer 16

Law of increasing opportunity cost

Question 17

Goods that are purchased for personal satisfaction

Answer 17

Consumer goods

Question 18

Goods that are used to produce other goods

Answer 18

Capital goods

Question 19

If society produces more capital goods today, it will have more capital goods available for production in the future, which implies it can produce more of everything in the future

Answer 19

Economic growth

Question 20

So why do we care about comparative advantage?

Answer 20

If we can show that if someone specializes in the production of a good in which they have comparative advantage then total production will be greater which benefits everyone