Econ Ch2 Key Terms

Front 1

Production possiblities frontier (PPF)

Back 1

represents the possible combinations of the two goods that can be produced in a certain period of time, under the conditions of a given state of technology and fully employed resources

Front 2

Law of increasing opportunity costs

Back 2

as more of a good is produced, the opportunity costs of producing that good increase

Front 3

Productive efficiency

Back 3

the situation that exists when a firm produces its output at the lowest possible per unit cost (lowest ATC)

Front 4

Productive inefficiency

Back 4

the condition where less than the maximum output is produced with given resources and technology. productive inefficiecny implies that more of one good can be produced without any less of another good being produced

Front 5

Technology

Back 5

the body of skills and knowledge concerning the use of resources in production. an advance in technology commonly refers to the ability to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources

Front 6

Trade (exchange)

Back 6

the process of giving up one thing for something else

Front 7

Ex ante

Back 7

phrase that means "before" as in before a trade

Front 8

Ex post

Back 8

phrase that means "after" as in after a trade

Front 9

Terms of trade

Back 9

how much of one thing is given up for how much of something else

Front 10

Transaction costs

Back 10

the costs associated with the time and effort needed to search out, negotiate, and consummate an exchange

Front 11

Comparative advantage

Back 11

the situation where a country can produce a good at lower opportunity costs than another country can

Front 12

Economic system

Back 12

the way in which society decides to answer key economic questions - in particular those questions that relate to production and trade

Front 13

Mixed capitalism

Back 13

an economic system characterized by largely private ownership of factors of production, market allocation of resources, and decentralized decision making. most economic activities take place in the private sector of this system, but government plays a substantial economic and regulatory role

Front 14

Property rights

Back 14

refer to the laws, regulations, rules, and soical customs that define what an individiual can and cannot do in society