Microeconomics Chapter 2

Front 1

Opportunity Cost

Back 1

The value of the best alternative forgone when an item or activity is chosen

Front 2

Sunk Cost

Back 2

A cost that has already been incurred in the past, cannot be recovered, and thus is irrelevant for present and future economic decisions.

Front 3

Law of Comparative Advantage

Back 3

The individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good.

Front 4

Absolute Advantage

Back 4

The ability to produce something using fewer resources than other producers use.

Front 5

Comparative advantage

Back 5

The ability to produce something at a lower opportunity cost than other producers face.

Front 6

Barter

Back 6

The direct exchange of one good for another without using money.

Front 7

Division of Labor

Back 7

Organizing products of a good into its separate tasks

Front 8

Specialization of Labor

Back 8

Focusing work effort on a particular product or a signle task.

Front 9

Production Possibilities of Frontier (PPF)

Back 9

A curve showing alternative combinations of goods that can be produced when available resources are used fully and efficiently; a boundary between inefficient nd unattainable combinations.

Front 10

Efficiency

Back 10

The condition that exists wehn there is no way resources can be reallocated to increase the production of one good without decreasing the production of another.

Front 11

Law Of Increasing Opportunity Cost

Back 11

To produce each additional increment of a good, a successively larger increment of an alternative good must be sacrificed if the economy's resources are already being used efficiently.

Front 12

Economic growth

Back 12

An increase in the econiomy's ability to produce goods and services; an outward shift of the production possibilities frontier.

Front 13

Economic system

Back 13

The set of mechanisms and institutions that resolve the what, how, and for whom questions

Front 14

Pure capitalism

Back 14

An economic system characterized by the private ownership of resources and the use of prices to coordinate economic activity in unregulated markets.

Front 15

Private Property Rights

Back 15

An owner's right to use, rent, or sell resources or property.

Front 16

Pure command system

Back 16

An economic system characterized by the public ownership of resources and cnetralized planning.

Front 17

Mixed System

Back 17

An economic system characterized by the private ownership of some resources and the public ownership of other resources; some markets are unregulated and other are regulated.

Front 18

The __ of any action is the expected benefit of the best alternative not chosen.

Back 18

opportunity cost

Front 19

A cost that cannot be recovered no matter what you do is a ___.

Back 19

sunk cost

Front 20

___ is the abiltiy to produce something with fewer resources than other producers.

Back 20

absolute advantage

Front 21

__ is the ability ot produce something at a lower opportunity cost than other producers.

Back 21

comparative advantage

Front 22

The __ leads to greater output because it results in greater specialization of labor.

Back 22

division of labor

Front 23

___ is a system of exchange in which products are traded directly for other products.

Back 23

barter

Front 24

Something that everyone is willing to accept in return for all goods and services is called a ____.

Back 24

medium of exchange

Front 25

A society is producing on its ___ if it uses its resources fully nad efficiently.

Back 25

production possibilities frontier

Front 26

A bowed-out production possibilities frontier indicates that the cost of producing either good ___ as greater amounts of goods are produced.

Back 26

increases

Front 27

Production is __ if there is no way to rearrange resources that will allow more of one good to be produced without causing less of any other good to be produced.

Back 27

efficient

Front 28

Any economic system must decide what goods will be produced, for whom they will be produced, and ____.

Back 28

How goods will be produced

Front 29

Most societies are a mixture of ____ and ____.

Back 29

Capitalism; a command economy

Front 30

The idea that people should be allowed ot do as they choose without government interference is called ___.

Back 30

Laissez faire

Front 31

In a command economy, resources are directed through ___.

Back 31

central planning

Front 32

The opportunity cost of an activity is the expected benefit from the best alternative that is foresaken. T/F

Back 32

true

Front 33

The price of something is usually the best measure of the opportunity cost of the activity. T/F

Back 33

false. Calculations of opportunity cost must also include the time spent away from the most valued alternative.

Front 34

The opportunity cost of a given activity is usually the same for all people. T/F

Back 34

false

Front 35

Opportunity cost measures the cost of the alternative given up less the expected benefit from the opportunity chosen. T/F

Back 35

false

Front 36

Opportunity costs vary with circumstances. T/F

Back 36

true

Front 37

Opportunity costs tend to be constant over time. T/F

Back 37

false

Front 38

Coparative advantage is caused by absolute advantage. T/F

Back 38

false

Front 39

The law of comparative advantage calls for specializing in the tasks in which one has a comparative advantage. T/F

Back 39

true

Front 40

ONe function of money is ot make it easier for exchange to take place. T/F

Back 40

true

Front 41

Barter decreases as an economy becomes more specialized. T/F

Back 41

true

Front 42

The division of labor allows the introduction of specialized machinery that makes workers more productive. T/F

Back 42

true

Front 43

A production possibilities frotier shift out when society moves from inefficient to efficient production. T/F

Back 43

false

Front 44

A production possibilities frontier illustrates opportunity cost by sloping downward. T/F

Back 44

true

Front 45

The law of increasing opportunity cost generates a production possiblities frontier that bows outward. T/F

Back 45

true