18 Questions
What is the principle that explains how price controls can have effects seen through other means in the market?
Market equilibrium
What happens according to the Law of Diminishing Returns when a factory adds additional workers beyond the optimal level?
Efficiency decreases
Which term refers to the additional satisfaction gained from consuming one more unit of a commodity?
Marginal Utility
In a market economy, what does the Market Model focus on?
Resource allocation through supply and demand
What is one of the advantages of specialization and trade in an economy?
Increased production efficiency
How does inflation impact the Production Possibilities Frontier (PPF) of an economy?
Shifts the PPF inwards
What does the 'what to produce' question in economics relate to?
Selecting the combination of goods and services to produce
In economics, the 'how to produce' question involves deciding on:
Which factors of production to use
When considering 'for whom to produce' in economics, what is the main concern?
Ensuring equitable distribution of goods and services
What would choosing more consumer goods over capital goods result in?
Less investment in long-term growth
Why might a society choose to use more machines rather than human labor in production processes?
To reduce costs and increase efficiency
In a market economy, what does the term 'specialization and trade' refer to?
The division of labor where individuals focus on specific tasks
What is the premise behind the Theory of Absolute Advantage?
Nations benefit most when they trade goods in which they produce more efficiently than anyone else.
What does Comparative Advantage mean?
Producing a good or service at the lowest cost compared to other countries.
How is Absolute Advantage defined?
When a country can produce a good or service at a lower cost or more efficiently than another country with the same input.
In the context of production, what does Opportunity Cost represent?
The cost of producing one unit of a good or service.
Why is it important for countries to trade based on their Comparative Advantage?
To achieve higher efficiency and benefit from lower opportunity costs.
What is the core principle behind Specialization in trade?
Producing goods where a country has a Comparative Advantage.
Learn about the theories of specialization and trade gains, including the Theory of Absolute and Comparative Advantage, which are crucial for understanding how markets, consumers, and producers adjust to changing conditions.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
