Chapter 2: The Economic Problem Flashcards
(21 cards)
production possibilities frontier (ppf)
the boundary between those combinations of goods and services that can be produced and those that cannot.
attainable production points are
inside and on the PPF
unattainable production points are
outside/beyond the PPF
production efficiency
production points ON the PPF achieve ___ ____ because there the goods and services are produced at the lowest possible cost.
points inside the PPF= attainable but inefficient
opportunity cost of an action
the highest-valued alternative foregone.
tradeoff
moving between points ON the PPF involves a ____ because something must be given up to get more of something else.
allocative efficiency
reached when goods and services are produced at the LOWEST POSSIBLE COST and in the quantities that provide the GREATEST POSSIBLE BENEFIT.
marginal cost of a good
is the opportunity cost of producing ONE more unit of it.
preferences
a person’s likes and dislikes and the intensity of these feelings.
marginal benefit
the benefit received from consuming ONE more unit of it.
measured by the most that people are WILLING to pay for another unit of it.
marginal benefit curve
shows the relationship between the marginal benefit of a good and the quantity consumed, slopes downward.
economic growth
occurs when production possibilities expand
technological change (key factor of economic growth)
the development of new goods and better ways of producing good and services
capital accumulation (key factor of economic growth)
the growth in capital resources including human capital
comparative advantage
if someone can perform the activity at a LOWER OPPORTUNITY COST than anyone else they have the ____ ____
absolute advantage
a person is MORE PRODUCTIVE than another person.
firm
an economic unit that hires factors of production and organizes those factors to produce and sell goods and services
market
any arrangement that allows buyers and sellers to get information and to do business with each other.
property rights
social arrangements that are govern the ownership, use and disposal of anyhing people value.
money
any commodity or token that is generally acceptable as a means of payment.
opportunity cost
highest-valued alternative that must be given up to get something.
