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Terms in this set (29)
stems from incompatibility between limited resources and unlimited wants
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
If opportunity costs are constant, the production possibilities frontier would be graphed as
a negatively sloped straight line
The primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
the basis for trade is
One of the great benefits of trade is
that it makes it possible for society to become better off by increasing its consumption.
If you can produce more of something than others with the same resources, you have
an absolute advantage
An example of a factor of production is
a worker hired by Dell.
If a commercial dairy farm wants to purchase feeding troughs, it does so in the
The Scottish philosopher Adam smith argued in 1776 that
Prices would do a better job coordination the activities of buyers and sellers that guilds could.
Property rights are
rights individuals or firms have to the exclusive use of theirproperty, including the right to buy or sell it
the natural resources used in production are made available in
When you purchase a new pair of jeans you do so in the
The ________ demonstrates the roles played by households and firms in the market system.
circular flow model
Which of the following is an example of spending on factors of production in the circular flow model?
The "Lucky Ducky" casino buys a new craps table for the casino floor.
In the circular flow model, households
spend earnings from resource sales on goods and services in the product market.
The circular flow model demonstrates
the roles played by households and firms in the market system.
a worker is hired in
a factor market
A successful market economy requires
well-defined property rights and an independent court system to adjudicate disputes based on the law.
What is a free market?
A free market is one where the government does not control the production of goods and services.
In what ways does a free market economy differ from a centrally planned economy? Unlike a free market economy,
centrally planned economies have extensive government controls.
What are the two main categories of participants in markets?
Firms and households.
Which participants are of greatest importance in determining what goods and services are produced?
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available.
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost.
Which of the following is not a step that economists use in developing a useful economic model?
Make a value judgement about the merits of the hypothesis.
The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of
Microeconomics is the study of
how households and firms make choices.
The branch of economics which studies the behavior of entire economies is called
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