Terms to Know
This is the study of how people and societies use limited resources to fulfill unlimited wants
What is economics
When a choice is made, and you give up the next best option.
What is opportunity cost.
Land, labor, capital and entreprenurship are the four what
What is the four factors of production.
This term describes when a country can produce a good at a lower opportunity cost than another country.
What is Comparative Advantage
In a command economy, how to use the factors of production are decided by
What is government and/or government leaders
Points on the PPC curve are
What is efficient.
Capital is divided into these two terms
What is human and physical capital.
This advantage exists when a country can produce more of a good using the same amount of resources as another country.
What is Absolute Advantage
This type of economy allows supply and demand to determine prices and production with minimal government intervention.
What is a Free Market Economy
This is the wise use of available resources to obtain the greates benefit possible
What is productive efficiency
If new technology allows for more computers to be made comparing computers and books, what will happen to the curve next?
What is shift out only for computers.
People who take risks to create companies for profit
What are entrepreneurs
If Country A has a comparative advantage in producing cars and Country B has a comparative advantage in producing planes, these countries can increase total output through this process where each specializes in what they're best at.
This type of economy combines different elements of multiple economies, often featuring both private enterprise and government intervention.
What is a mixed economy
When a country specializes in a good for trade due to a lower opportunity cost.
What is comparative advantage
Sleep and Study are an example of constant opportunity cost. Cars and Bicycles are an example of what
What is increasing opportunity cost
It's the factor that can be skilled, semi-skilled, or unskilled and is often compensated with wages.
What is Labor
By focusing on the production of goods for which they have lower relative costs, countries can engage in this mutually beneficial exchange process, leading to a more efficient allocation of global resources.
While a command economy has centralized decision-making, this potential downside can occur, such as shortages or surpluses, because it's challenging for a central authority to accurately predict all market needs.
What is Economic Inefficiency
This is the term for when societies needs are met.
What is allocative efficiency.
This is when the point is inside the curve.
What is inefficiency
This factor of production refers to all naturally-occurring resources, such as minerals, water, and fertile soil.
What is Land
To determine which country has a comparative advantage in producing a good, you should look at the cost of giving up the production of another good, also known as this cost.
What is opportunity cost
In a free market economy, Adam Smith said this hand self-regulates the nature of the marketplace.
What is the invisible hand