Chapter 2: The Economic Problem Flashcards Preview

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Flashcards in Chapter 2: The Economic Problem Deck (21):
1

production possibilities frontier (ppf)

the boundary between those combinations of goods and services that can be produced and those that cannot.

2

attainable production points are

inside and on the PPF

3

unattainable production points are

outside/beyond the PPF

4

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

5

opportunity cost of an action

the highest-valued alternative foregone.

6

tradeoff

moving between points ON the PPF involves a ____ because something must be given up to get more of something else.

7

allocative efficiency

reached when goods and services are produced at the LOWEST POSSIBLE COST and in the quantities that provide the GREATEST POSSIBLE BENEFIT.

8

marginal cost of a good

is the opportunity cost of producing ONE more unit of it.

9

preferences

a person's likes and dislikes and the intensity of these feelings.

10

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.

11

marginal benefit curve

shows the relationship between the marginal benefit of a good and the quantity consumed, slopes downward.

12

economic growth

occurs when production possibilities expand

13

technological change (key factor of economic growth)

the development of new goods and better ways of producing good and services

14

capital accumulation (key factor of economic growth)

the growth in capital resources including human capital

15

comparative advantage

if someone can perform the activity at a LOWER OPPORTUNITY COST than anyone else they have the ____ ____

16

absolute advantage

a person is MORE PRODUCTIVE than another person.

17

firm

an economic unit that hires factors of production and organizes those factors to produce and sell goods and services

18

market

any arrangement that allows buyers and sellers to get information and to do business with each other.

19

property rights

social arrangements that are govern the ownership, use and disposal of anyhing people value.

20

money

any commodity or token that is generally acceptable as a means of payment.

21

opportunity cost

highest-valued alternative that must be given up to get something.