Factors of Production
What are the four main factors of production?
Land, Labor, Capital, and Entrepreneurship
Define capital in the context of economics.
What is an entrepreneur?
Individuals who start and manage businesses, taking on risk.
What does it meant to have a comparative advantage?
Ability to produce a good at lower opportunity cost than another producer.
Who is known for advocating free trade?
Adam Smith.
How does labor affect production?
Labor affects production by providing the necessary human effort to create goods and services.
Give and example of physical capital.
Machinery, vehicles, tools, etc.
What risks to entrepreneurs face?
They face risks of financial loss, time investment, and potential failure.
How do you determine comparative advantage?
By comparing the opportunity costs of producing different goods.
What is a tarriff?
A tax on imported goods to protect domestic products.
Explain the relationship between factors of production and supply?
They determine the quantity and cost of goods supplied in the economy.
What is human capital?
Skills, education, and experience of workers.
Why is innovation important for entrepreneurs?
Innovation can lead to new markets and increased efficiency.
What is the difference between absolute and comparative advantage?
Absolute advantage refers to the ability to produce more of a good, while comparative advantage focuses on lower opportunity costs.
Why might a country implement protectionist policies?
They can limit competition and lead to higher prices for consumers.
How did the Industrial Revolution change factors of production?
It increased production efficiency with the factory system and mechanization.
How does technology serve as a form of capital?
Technology improves productivity and can reduce costs.
How can entrepreneurs impact the economy?
Entrepreneurs create jobs, drive innovation, and contribute to economic growth.
What is opportunity cost in production?
The cost of the next best alternative foregone when making a decision.
Describe a potential downside of free trade.
It can lead to environmental degradation and exploit labor in developing countries.
How do environmental regulations affect production costs.
Environmental regulations can increase production costs through compliance and operational changes.
What role do financial institutions play in capital?
They provide funds and resources for businesses to invest in capital.
What is opportunity cost for entrepreneurs?
They must consider what they sacrifice (e.g. time, resources) when starting a business.
Provide an example of comparative advantage in international trade.
If Country A specializes in wine and Country B in cloth, they trade to maximize efficiency.
What is the significance of the production possibilities frontier?
It illustrates the trade-offs in production between two goods and helps determine opportunity costs.