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Econ 200 Chapter 2
Terms in this set (35)
law of increasing opportunity cost
As an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will increase.
Economy that combine elements of market capitalist and of command socialist economic systems.
Situation in which all the factors of production that are available for use under current market conditions are being utilized.
The process through which an economy achieves an outward shift in its production possibilities curve.
Includes money and other "paper" assets (such as stocks and bonds) that represent claims on future payments.
The knowledge that can be applied to the production of goods and services.
When an economy is operating on its production possibilities curve.
The value, or satisfaction, that people derive from the goods and services they consume and the activities they pursue.
Situation in which an economy is producing the goods and services in which it has a comparative advantage.
Situation in which the economy is using the same quantities of factors of production but is operating inside its production possibilities curve.
production possibilities model
Shows the goods and services that an economy is capable of producing—its opportunities—given the factors of production and the technology it has available.
The human effort that can be applied to the production of goods and services.
The set of rules that define how an economy's resources are to be owned and how decisions about their use are to be made.
The skills a worker has as a result of education, training, or experience that can be used in production.
A factor of production that has been produced for use in the production of other goods and services.
production possibilities curve
A graphical representation of the alternative combinations of goods and services an economy can produce.
factors of production
The resources available to the economy for the production of goods and services.
market capitalist economy
Economy in which resources are generally owned by private individuals who have the power to make decisions about their use.
In producing a good or service, the situation that occurs if the opportunity cost of producing that good or service is lower for that economy than for any other.
The resources of nature that can be used for the production of goods and services.
command socialist economy
Economy in which government is the primary owner of capital and natural resources and has broad power to allocate the use of factors of production.
If the economy is on Curve 1, it:
will move to Curve 2 more quickly if it chooses point Y.
Which of the following explains why the U.S. economy produces more than the Chinese economy?
The United States has more capital per worker available than China.
A factor of production that has been produced for use in the production of other goods and services is:
One reason you go to college is to improve your employment opportunities and obtain a higher income in the future. In the context of production possibilities, this is most comparable to:
producing relatively more capital goods and relatively fewer consumer goods.
The three broad types of resources used to produce goods and services are also known as:
factors of production.
The point representing a combination of consumer goods and capital goods that would result from underutilization or inefficient use of society's available resources is point:
If wages are higher in the United States than in Brazil, then:
trade is still beneficial to the United States and Brazil.
The production possibilities curve represents the fact that:
if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
This production possibilities curve is:
bowed out from the origin because of increasing opportunity costs.
Governments often establish rules that influence how an economy operates. Which of the following rules will most likely increase the ability of society to produce goods and services?
providing tax incentives to encourage education by workers
The economy will experience its least growth by operating at point:
In general, production possibilities curves are "bowed out" because:
of the law of increasing opportunity cost.
The maximum amounts of guns and butter this economy can produce is:
all of the above combinations are maximum possible combinations.
For a factor of production to be called capital it must:
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