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11 Cards in this Set

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ECONOMICS FOR TEST #1
ECONOMICS FOR TEST #1
Define Production Possibilities Frontier
Used to illustrate scarcity, choices and growth
How do we derive Production Possibilities Frontier
from our country's supply of factors of production:
* Land - natural resources
* Labor - people
* Capital - financial resources, machines, etc.
* Entrepreneurship - "the owner"
Give some examples of Factors of Production using the "Subway" model
Land - lettuce, bread, tomatoes, turkey
Labor - employees
Capital - Store, sandwich line, oven
Entrepreneur - Doug Nelson
FC#1: Explain what each of the points below illustrates as it pertains to Production Possibilities Frontier:
C1: Production all butter, no resources for guns
C2: All factors to produce guns, no butter
B: Efficient combination of guns/butter: Full employment
A: Ineffecient combination of resources to produce butter/guns
D: unattainable combo guns/butter given current supply of factors of production
FC#2: Explain each point as it pertains to production possibilities frontier as it illustrates choice and or opportunity cost:
A ---- B: "x" want more guns
B: unattainable combination of guns/butter. Not enough resources to produce combo
B ---- C: "y" must give up gungs "y" butter to get "x" more guns
Define Opportunity cost:
the value of the best alternative surrendered when a choice is made.
Goto FC#2 - what is the opportunity cost of "x" guns in that illustration
"y" butter
What must a country have in order for growth:
more factors of production: more factors allows for an increase in production of guns AND butter.
FC#3: Explain the following diagram as it pertains to Production possibilities frontier to illustrate growth
With an increase in the supply of factors of production, the country can have more guns and butter than before. EG: immigration, conquest, new discoveries
FC#4: Explain the following illustration as it pertains to production possibilities frontier growth and technology
Technology allows current supply of factors of production more effictively:
might not apply to all products or industries