Unit 1 Flashcards
What are the causes of a market failure?
Externalities (when production affects bystanders), market power
Opportunity cost
Whatever must be given up to attain an item
Marginal changes
Incremental adjustments to existing plan
What are the 2 roles economists play?
- Scientists (explaining world)
- Policy advisors (improving world)
What are the 3 factors of production?
Labor, land capital
What is capital?
Buildings and machines used in production
What are the 2 markets in a circular-flow diagram?
- Markets for goods and services
- Markets for factors of production
Higher slope in PPF means what?
Lower opportunity cost
What’s the reason for the PPF shifting outward?
Economic growth
What indicates a bow-shaped PPF?
Increasing opportunity cost
What does increasing opportunity cost indicate?
A bow-shaped PPF
What does the short-run tradeoff between inflation and unemployment imply?
An increase in inflation will be accompanied by an increase in employment
What is the relationship between a country’s productivity and standard of living?
Positive
What does the PPF illustrate?
Combinations of output than an economy can produce
In a self-sufficient country, where in the PPF does production lie?
In the middle
