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Models
PPF
PPF 2.0
Circular-Flow
Optional
100
We use these as simplified versions of reality used to better understand real-life situations.
What are models?
100
As a whole, the PPF helps us to better understand this key economic concept.
What is choice? (Tradeoffs)
100
A PPF is often not linear for this reason.
What are increasing opportunity costs?
100
Goods and services are traded in this market.
What is the product market?
100
Land, labor and capital are traded in this market, according to the Circular-Flow Diagram.
What are the factor markets?
200
Suppose we draw a two-dimensional graph that is modeling a person's weight. We put weight on the vertical access and exercise levels on the horizontal access. This is the type of relationship we would expect to see on this graph were we to draw a line.
What is a negative relationship?
200
For a given country, this is represented by the intersection of the PPF along any axis.
What is the maximum production level for a given good or service?
200
If a country is producing at any point outside of the PPF frontier, then its allocation of resources could be described as this.
What is infeasible?
200
This always flows in the opposite direction of physical items in the Circular-Flow Diagram.
What is money?
200
This term describes a situation where an individual has a lower opportunity cost for producing a good or service than all other competitors.
What is comparative advantage?
300
Suppose we draw a two-dimensional graph that is modeling a person's weight. We put weight on the vertical access and exercise levels on the horizontal access. With these variables on our axes, we are assuming that all other factors influencing a person's weight do not change. These are some examples of these other factors that influence weight. (Name three)
What are age, gender, genetic history, diet, access to fast food restaurants, friends and access to gyms?
300
If a country is producing at a point inside of the PPF frontier, then it implies that its allocation of resources is this.
What is feasible and inefficient?
300
If the PPF shifts outward, then this would indicate that this has happened.
What is economic growth?
300
When a firm sells a good or service it has produced, it receives this in return.
What is revenue?
300
In order for there to be gains from trade, the terms from trade must fit this condition.
What is between the opportunity costs for both countries?
400
This is a Latin phrase meaning "other things equal".
What is ceteris paribus?
400
Suppose an economy can either produce coconuts or fish. If the opportunity cost of one fish is .75 coconuts/fish, then this is the opportunity cost of one coconut.
What is 4/3 fish per coconut?
400
If a country is producing at any point along the PPF frontier, then its allocation of resources could be described as this.
What is feasible and efficient?
400
Households receive their income from selling these.
What are land, labor and capital?
400
This is the reason that opportunity costs are often increasing in the PPF model.
What is low levels of production use resources that are most suited to production of a good or service?
500
This model indicates that factors of production are traded in exchange for wages, rents and profits.
What is the circular flow model?
500
A true efficiency in the economy is defined by both of these characteristics.
What are efficiency in production and efficiency in allocation?
500
The concept of opportunity cost is reflected in the PPF by this.
What is the slope of the PPF frontier?
500
In the simplified Circular-Flow Diagram from this chapter, the model glaringly omits these two sectors.
What are the government and foreign sectors?
500
This term describes what an individual should do if he or she has a comparative advantage in production.
What is specialize?