Macroecon ch2

The value of the best alternative activity that is forgone is known as the:

opportunity cost.

While making an economic choice, economic decision makers should ignore _____.

sunk costs

In terms of opportunity cost, _____ is the ultimate constraint.

time

Which of the following is true regarding opportunity cost?

Opportunity cost may vary with circumstances.

A cost that has already been incurred and should not be considered while making economic choices is called a(n):

sunk cost.

Which of the following is an example of sunk cost that are no affected by economic choices?

Robert's investment in an unsuccessful business venture

When you specialize in a task that you do best, you are applying the:

law of comparative advantage.

The _____ states that the individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in producing that good.

law of comparative advantage

_____ is the ability to make something using fewer resources than other producers use.

Absolute advantage

Which of the following is true of comparative advantage?

Comparative advantage focuses on the opportunity cost of using resources.

Which of the following is true of absolute advantage?

Absolute advantage focuses on the use of fewer resources.

The total production of goods and services in the world economy will increase if:

nations trade and specialize in the production of a good in which they have a comparative advantage.

Which of the following is true of specialization and exchange?

Specialization and exchange creates more interdependence in an economy.

Which of the following is an advantage of specialization of laborers?

It allows workers to develop more experience at a particular task.

_____ involves the direct exchange of one good for another without the use of money.

Barter

We can say that a firm is practicing division of labor if:

each worker in the firm specializes in and performs a particular task in the production process.

Which of the following is an assumption of the study of an economy's production possibilities?

Output is limited to just two broad classes of products: consumer goods and capital goods.

The production possibilities frontier shows:

possible combinations of two types of goods that can be produced when all available resources are fully and efficiently employed.

Which of the following is the best description of the production possibilities frontier (PPF)?

The PPF is a curve showing alternative combinations of goods that can be produced when available resources are used efficiently.

_____ exists in production when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another.

Efficiency

Which of the following statements is true?

A point on the production possibility curve represents output combinations that are efficient.

One of the key criteria used to distinguish among different economic systems is:

how are allocation decisions made.

Which of the following is a fundamental question that an economic system must answer?

What goods and services are to be produced?

Which of the following is a feature of a mixed economy?

Private ownership of some resources and public ownership of other resources