CHAPTER 2

Whenever a society forgoes current consumption in order to invest in capital​ goods,

the more the society can consume in the future

Each individual must make choices because

resources are limited and therefore cannot satisfy one's many competing wants

Opportunity cost

is the value of the next best alternative as a result of choosing some given alternative

The division of labor increases the output of society by

allowing resources to specialize in the tasks for which they have a comparative advantage

The following table lists the costs incurred by a student attending a public university for one semester. ​(Note: By attending​ college, the student will have to work fewer hours but will stay in his current​ apartment.)

Tuition and Fees: $2,000

Room and Board: $950

Books and supplies: $300

Lost wages: $5,000

What is the total opportunity cost that the student incurs by attending college for one​ semester?

$7,300

greater economics growth is shown as

the distance the production possibilities curve shifts outwards

Economic growth implies

you can now have more of all good

Specialization and comparative advantage

a) lead to greater output even if you can do everything better than someone else

b) lead to international trade and overall gains for the nations involved

c) lead to greater productivity

d) all of the above

all of the above

SteveSteve can​ wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. HisHis roommate MikeMike can​ wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour.

a) the absolute advantage in laundry is held by

b) the comparative advantage in meal preparation is held by

a) steve

b) mike

Mouse click anywhere on the graph to the right and drag the ​'savings​' slider to the right. Increasing savings implies the production of more capital goods. Use this to help answer the question below.

Suppose the economy depicted in the accompanying graph was initially at point ​'S​'. In order to foster a more rapid rate of​ growth, the economy should

reduce the production of consumption good

the existence of scarcity require

that people must make choices and face trade-offs in using their resources

Which of the following statements about production possibilities curves is not​ true?

a linear production possibility curve illustrates the concept of increasing opportunity costs

Factors of production include

land, labor, physical capital, human capital and entrepreneurship

A production possibilities curve represents

all possible combinations of output that could be produced assuming fixed productive resources and their efficient use

Which of the following statements is​ true?

everyone can benefit when people specialize where they have a comparative advantage and then trade with each other

Why do economists avoid making the distinction between wants and needs​?

the term need is subjective making it difficult to distinguish between something someone wants and something they need.