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Key Terms
Production Possibilities
Economic Principles
Shifts in Production
Concept Check
100
Any combination of goods that can be produced using currently available resources.
What is attainable point.
100
At any given moment, the PPC confronts society with this.
What is a trade-off.
100
Also known as "the low-hanging fruit" principle.
What is the Principle of Increasing Opportunity Costs.
100
Increases in productive resources (such as labor and capital equipment) or improvements in knowledge and technology cause the ppc to shift in this direction.
What is outward.
100
Susan's opportunity cost of gathering a pound of nuts is now ½ pound of coffee and Tom's opportunity cost of gathering a pound of nuts is now only 1 pound of coffee. They should do this.
What is trade.
200
This is what is meant when people speak of economic growth.
What is an outward shift in the PPC.
200
Everyone does best when each person (or each country) concentrates on the activities for which his or her opportunity cost is lowest
What is The Principle of Comparative Advantage.
200
An outward shift in the PPC indicate this trend in the economy.
What is economic growth.
200
By doing this, nations can produce and consume more than they could otherwise.
What is working together and specializing.
300
Having services performed by low-wage workers overseas.
What is outsourcing.
300
Investment in new factories and equipment; population growth; improvements in knowledge and technology; and specialization.
What are things that cause the quantity of productive resources to grow in an economy.
300
This principle reminds us that the opportunity cost of spending more time on any one activity is having less time available to spend on others.
What is The Scarcity Principle
300
The value of capital investment per worker in the United States is about 30 times as great as in Nepal. This difference over time can lead to
What is large income gaps between nations.
300
If one country can produce goods and services with fewer resources, that country has this advantage.
What is an absolute advantage.
400
One person has this advantage over another if he or she takes fewer hours to perform a task than the other person.
What is absolute advantage.
400
A shift in production possibilities curve can turn a point that was previously considered to be _____ into an ______ point.
What is unattainable into an attainable point.
400
This principle supports that when two people (or two nations) have different opportunity costs of performing various tasks, they can always increase the total value of available goods and services by trading with one another.
What is the Principle of Comparative Advantage.
400
By working together and specializing, countries can produce and consume more of each good if they do this.
What is trade.
400
Even if a country has an absolute advantage in producing goods and services they should still trade where another country has this advantage.
What is a comparative advantage.
500
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
What is the production possibilities curve.
500
The absolute value of the slope of the PPC is equal to _______ of the good plotted on the horizontal axis.
What is the opportunity cost.
500
"What to Produce" is another way of phrasing this principle.
What is the Scarcity Principle.
500
Higher rates of saving and investment cause incomes to grow which ultimately leads to
What is an increase in production.
500
The Nobel laureate Milton Friedman coined this principle to illustrate the concept of scarcity.
What is the No-Free Lunch Principle