Econ Chapter 1-3 Quiz

Economics

allocation of scarce resource

Entrepreneur

risk taker that combines the factors of production to provide a good or service

Absolute Advantage

when an individual or group can carry out a task faster than anyone else

Comparative advantage

when an individual or group can provide a good or service at lowest marginal opportunity cost

Production Possibilities Curve =

an economic model of the alternative combinations of the amounts of two goods or services that an economy can produce by transferring resources for one good or service to the other

Factors of production =

1.) Land (natural resources)

2.) Labor (workforce)

3.) Capital (Physical: man made technology Human: Doctors, lawyers)

4.) Entrepreneurship

5.) Time

Trade-Off

options that we give up, so as to obtain a particular product or service

Margin

refer to extra or additional benefit that comes from producing or consuming ONE more unit of something.

5 Powers of Economic Thinking

1.) TANSTAAFL

2.) All decisions are made at the Margin

3.) All decisions are Rational

4.) Prices are Signals to producers and consumers

5.) People are Maximizers

5 Variables of shifting outward of Production Possibilities Curve (FOP)

1.) Increase the productive labor force (Labor)

2.) Increase the quantity of and quality of natural resources (land)

3.) Increase quantity and quality of capital (physical/human capital)

4.) Increase in Health and Education

5.) Increase in Technology

Law of Increasing Opportunity Cost

concept that as you continue to increase production of one good, the opportunity cost of producing that next unit increases.

Things to think about when determining increasing PPC:

1.) Is it Effecting the 5 factors? 2.) Is it a effecting positively or negatively? 3.) Is it effecting production one or two?