chapter 7

efficiency

quality of producing effectively with a minimum of waste

input

total amount invested in the production of a good

output

the total amount of a good that is produced

low

fill in the blank 

the goal of efficiency is to turn out quality goods at ____ prices creating wealth for an economy

• initiative

• intelligence

• imagination

what are the fundamental components for successful entrepreneurs?

intelligence

mental alertness; intelligent work creates the wealth of nations

total cost 

the sum of all of the factors of production used in making a good

average cost

the cost of all factors of production used in producing one unit of a good

reducing costs

the lower a total average cost, the more profit a producer will have

fixed cost

expense that does not change even if the business is not producing anything

variable cost 

expense that changes as the operation of the business is carried out

total cost

sum of fixed and variable costs

marginal cost 

cost to produce one more unit of a good

marginal product of labor

how much additional output a company can produce by adding one more worker

profit

total revenue from sales minus total cost of producing products

marginal revenue 

total revenue divided by production output

total revenue

marginal revenue x output per day

profit per day

total revenue minus total cost

marginal profit 

change in profit per day divided by change in production output per day

division of labor 

the dividing of work into individualized tasks

• factory

• mass production

what are the best examples of division of labor?

pin-making

example used by adam smith in wealth of nations

adam smith

fill in the blank

pin-making is an example used by _____ _______ in Wealth of Nations; one person could barely make 1 lb. of pins per day; 18 workers made more than 40,000 pins

1. goods 

2. inventions 

3. tools 

4. resources 

5. variety 

6. specialities 

fill in the blank 

list the advantages of division of labor: 

1. More ______ produced 

2. More ________ encouraged 

3. Fewer ____ needed 

4. Better use of _________

5. Greater _______ of goods (including services) 

6. Development of _________

1. boredom

2. standardized

3. technological

4. small industries

5. skilled craftsmen

6. hostility

7. small economies

fill in the blank

list the disadvantages of division of labor.

1. _______ of workers 

2. ___________ goods 

3. ___________ unemployment

4. Decline of ______ _________

5. Decline of ______ _________ 

6. ________ between workers and producers 

7. Damage to _______ _________

• henry Ford

• model T

fill in the blank

mass-production was first used by ______ _____ and the _______ ___

1. division of labor

2. standardized parts

3. automatic conveyance (assembly line)

list the characteristics of mass-production.

1. labor

2. time of production

3. increase

4. average cost

fill in the blank

pros of mass production:

1. Less overall ______ 

2. Less overall ____ __ __________

3. Significant ________ in total production

4. Saves on _______ _____

1. increases

2. mass-produced

3. overspecialization

fill in the blank

cons of assembly line:

1. Over-expansion of costs (average cost ________) 

2. Not all products should be _____-_________ 

3. ______________ can occur

absolute advantage

the ability of one individual to produce goods more effectively than his competitors / competitors

comparative advantage

the ability of a person to produce a good at an opportunity cost that is lower than another producer

geographic specialization

production of goods in which a country or region has absolute or comparative advantage

1. lower

2. regional absolute advantages 

3. trade relationships 

fill in the blank 

with geographic specialization, it…

1. Results in more goods at ____ prices across a nation 

2. _________ ________ ________ would be encouraged 

3. ______ _________ are being encouraged

protectionism

theory that domestic manufacturers need government protection against foreign competitors

protectionism

does not promote a healthy trade relationship among nations

david ricardo 

against protectionism; believes that protectionism does not promote a healthy trade relationship among nations

free trade

little to no restrictions on trade between nations or on goods produced in the nation

tariffs

taxes paid on imported goods before they can enter a nation

duty fees 

another word for tariffs

1. low

2. invested

fill in the blank

results of free international trade:

1. Prices will be ____ 

2. Savings will be ________ in other areas which will benefit the economy

1. not trustworthy

2. moral/social

3. dependence

fill in the blank

reasons to avoid international trade:

1. Some nations are ___ _________ 

2. Some nations have _____/______ problems 

3. __________ on other nation’s goods/economies may develop