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24 Cards in this Set

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  • Back
is the boundary between the combinations of the goods and sevices that can be produced and the combinations that cannot be produced, given the available factors of production- land, labor, capital, and entrepreneurship- and the state of technology
production possibilities frontier (PPF)
PPF puts 3 features of production possibilities in sharp focus
-attainable and unattainable combinations
-full employment and unemployment
-tradeoffs and free lunches
is a constraint or limit to what is possible that forces an exchange or a substitution of one thing for something else
every choice invloves an opportunity cost
no such thing as a free lunch
occurs when all available factors of production are being used
full employment
unemployment can be used to describe
unused land, labor, and capital
some resources are not being used or are not being used in their most productive way (inside PPF) more of some goods or services can be produced without producing less of others
when a free lunch is possible
We might___________ get a free lunch, but we______________ face tradeoffs
decrease in the other items' quantity divided by the increase of the quantity of the particular item
opportunity cost ratio
The opportunity coat of one item is equal to the ________ of the opportunity cost of the other item
increasing opportunity cost on a graph
PPF line bows outward
when you have increasing opportunity costs than the items are not
equally productive
occurs when we produce the quantities of goods and services that people value most highly
efficiency is achieved when two conditions are met-
-production efficiency
-allocative efficiency
if we cannot produce more of one good or service without producing less of some other good or service (on PPF) not under
production efficiency
unemployed resources or resources not used most productively is
production inefficiency
when we produce the combination of goods and services on the PPF that we value most highly
allocative efficiency
PPF shows what is ________, marginal benefit is an expression of what is ________
____________, is the quantity people must forgo. _____________, is the quantity people are willing to forgo.
opportunity cost
marginal benefit
to achieve allocative efficiency we must
compare marginal benefit with the marginal cost
concentrating on the porduction of only one good
if one person can perform the activity at a lower opportunity cost than someone else
comparative advantage
when one person is more productive than another person in several or even all activities
absolute advantage
not possible for anyone to have ____________ in everything
comparative advantage