Chapter 2

Question 0

Production

Answer 0

Any activity that results in the conversion of resources into products that can be used in consumption.

Question 1

Scarcity

Answer 1

A situation in which the ingredients for producing the things that most people desire are insufficient to satisfy all wants at a zero price.

Question 2

Land

Answer 2

The natural resources that are available from nature. Land as a resource includes location, original fertility and mineral deposits, topography, climate, water, and vegetation.

Question 3

Labor

Answer 3

Productive contributions of humans who work.

Question 4

Physical capital

Answer 4

All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production.

Question 5

Human capital

Answer 5

The accumulated training and education of workers.

Question 6

Entrepreneurship

Answer 6

The component of human resources that performs the function of raising capital; organizing, managing, and assembling other factors of production; making basic business policy decisions; and taking risks.

Question 7

Goods

Answer 7

All thinks from which individuals derive satisfaction of happiness.

Question 8

Economic goods

Answer 8

Goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price.

Question 9

Service

Answer 9

Mental of physical labor or assistance purchased by consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, house cleaners, educators, retailers, and whole salers; items purchased or used by consumers that do not have physical characteristics.

Question 10

Opportunity cost

Answer 10

The highest- valued, next- best alternative that must be sacrificed to obtain something or to satisfy a want.

Question 11

Production possibilities curve (PPC)

Answer 11

A curve representing all possible combinations of maximum outputs that could be produced, assuming a fixed amount of productive resources of a given quality.

Question 12

Technology

Answer 12

The total pool of applied knowledge concerning how goods and services can be produced.

Question 13

Efficiency

Answer 13

The case in which a given level of input is used to produce the maximum output possible. Alternately, the situation in which a given output is produced at a minimum cost.

Question 14

Inefficient point

Answer 14

Any point below the production possibilities curve, at which the use of resources is not generating the maximum possible output.

Question 15

Law of increasing additional cost

Answer 15

The fact that the opportunity cost of additional units of a good generally increases as people attempt to produce more of that good. This account for the bowed-out shape of the productions possibilities curve.

Question 16

Consumption

Answer 16

The use of goods and services for personal satisfaction.

Question 17

Specialization

Answer 17

The organization of economic activity so that what each person (or region) consumes is not identical to what that person (or region) produces. An individual may specialize, for example, in law or medicine. A nation may specialize in the production of coffee, e-book readers, or digital cameras.

Question 18

Comparative advantage

Answer 18

The ability to produce a good or service at a lower opportunity cost compared to other producers.

Question 19

Absolute advantage

Answer 19

The ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, the ability to produce the same quantity of a good or service using fewer units of labor or resource inputs.

Question 20

Division of labor

Answer 20

The segregation of resources into different specific tasks. For instance, one automobile worker puts on bumpers, another doors, and so on.