Economic Theory
These are the 4 factors of production.
What is Land, Labor, Capital, and Entrepreneurship?
This is how people tend to act.
What is in their own interest?
This is what we call a situation where one party is better at producing both goods over a second party.
What is an Absolute Advantage?
These are the people who benefit when trade occurs
Who is everyone?
This is what is given up when you face an opportunity cost.
What is "the next best option"?
This is the type of economy where a central authority (king, political power) makes all the decisions of production.
What is a command economy?
These are the two conditions of which setting a tariff is acceptable.
What are national defense and reciprocal tariffs?
Countries should produce at these portions of the graph when free trade is available.
What are "The extremes" (end points)?
This happens to production when tariffs are imposed
What is "decreases"?
These are the three benefits when people specialize in labor
What are increased dexterity, time saved in switching tasks, and invention of machines?
Economics is the study of how scarce resources with these uses are chosen.
What is Alternative?
Adam Smith refers to this as 'moving markets'
What is the "Invisible Hand"?
What is higher utility?
This describes the situation of giving up less to do something than another party's costs.
What is a comparative advantage?
This type of action is thought out and the pros and cons are considered before acting.
What is a rational action?
What are "Being uncomfortable", "Seeing a better situation possible", and "Believing intentional action will result in change"
According to Adam Smith, this principle is responsible for the rise of the wealth of nations.
What is the division of labor?
This is why the PPF is often a curved line instead of straight line.
What are "Different abilities of workers"?
When profits of one area exceed the profits of another area, industry will generally do this
What is "flow into the more profitable field"?
This type of statement refers to how things ARE, not how they SHOULD be.
What is a POSITIVE statement?
This term refers to when you maximize the benefit of scarce resources.
What is efficiency?
This is what we call a local market when trade is prevented with the intention of preserving the producers.
What is "The monopoly of home market"?
This is how a PPF graph moves when a technology shock (increase) is discovered.
What is OUTWARDS?
These must be well established and enforced for trade to occur.
What are property rights?
in I, Pencil, it is mentioned that this is "whom knows how a pencil is made"
What is "No one"?