Production, Economic growth, and Trade Flashcards
What is Production?
Turning resources into products and services that people are willing and able to buy
What are the 4 factors of production?
Land, Labour, Capital, and Entrepreneurial Ability
Economists refer to the payment for the use of land as ______?
Rent
Labour is paid in _______?
Wages
Improvement to labour, from training, education, and programs, is called what?
Human Capital
What is Capital?
All manufactured products that are used too produce other products and services (eg.machines)
The payment to owners of capital is called ______.
Interest
What is Entrepreneurial Ability?
Entrepreneurs make decisions on how to combine Land, Labour, and Capital to produce goods and services
Entrepreneurs earn “profit”
What is the difference between Production Efficiency and Allocative Efficiency
Production Efficiency = occurs when the mix of goods is produced at the lowest possible opportunity cost
Allocative Efficiency = occurs when the mix of goods and services produced in an economy is exactly what society desires
No country has an infinite supply of available workers or the space and machinery that would be needed to put them all to work efficiently. No country can break free of these natural constraints, what are these “limits” called?
Production Possibilites Frontiers
What does Production Possibilities Analysis assume?
that the economy produces only 2 products and that the quantity of resources and technology of the economy remain constant (ceteris paribus)
Economic Growth can be viewed as an _________ shift on the PPF
Outward
Economic growth has two basic determinants, what are they?
Expanding resources and Improving Technologies
What are Imports and Exports?
Imports = the goods we buy from other countries
Exports = the goods we sell to other countries
What is the difference between Absolute advantage and Comparative advantage
Absolute = When a country can produce more of a good than another country using the same amount of resources
Comparative = When a country has a lower opportunity cost of producing a good when compared to another country
