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In a circular flow diagram, who produces and sells goods and services?
firms
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In a circular flow diagram, who uses factors of production?
firms
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In a circular flow diagram, who owns and sells factors of production?
households
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In a circular flow diagram, who buys and consumes goods and services?
households
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In a market for goods and services, ____buy and ____ sell.
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In a market for factors of production, ___ buy and ___ sell.
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when economists describe how the world should be it is a _______ statement
normative
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when economists describe the world as it is it is a ______ statement
positive
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the value of what you give up to get something else
opportunity cost
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direct monetary cost
explicit cost
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something you give up, but do not directly pay or lose money for
implicit cost
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how do you calculate opportunity cost?
explicit cost + implicit cost
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On Friday you could go to work an earn $30 or you could go the movies with friends that costs $20. What is your opportunity cost of attending the movies? What is the implicit cost? What is the explicit cost?
- opportunity cost: $50
- implicit cost: $30
- explicit cost: $20
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illustrates the different quantities of two goods that can be produced with given resources
production possibilities frontier
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the producer that requires a smaller quantity of inputs to produce a good is said to have ________ advantage
absolute
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the producer who gives up less of other goods to produce a certain good is said to have ____ advantage
comparative
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the ability to produce a good using fewer inputs than another producer
absolute advantage
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whatever must be given up to obtain an item
opportunity cost
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the ability to produce a good at a lower opportunity cost than another producer
comparative advantage
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if a campus offers free lunch to the students, what is the explicit cost?
zero
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what is one of the advantages to specialize in producing a good or service and then trading with another country?
you will be able to consume at a point outside your production possibilities frontier
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when should a country specialize in producing a good?
when it has a comparative advantage
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on a production possibilities frontier, which points are efficient?
points on the frontier
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when making decisions what should you compare?
marginal benefit vs marginal cost
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the scarcity principle applies to the allocation of what?
all resources
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on a production possibilities frontier, which points are not feasible?
any points outside the possibility frontier
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what would cause a production possibility frontier to shift outward?
a technological improvement
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on a production possibility frontier, which points are inefficient?
points inside the frontier
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on a production possibility frontier, which points are feasible?
points inside or on the frontier
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what must be involved for a given question to be considered an economic question?
scarcity
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if johnny can produce 17 pants in an hour and martha can produce 18, who has absolute advantage?
martha
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when does economic growth occur?
when existing resources become more productive or more resources are being gained
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