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Countries with high labor costs tend to:
Countries with high labor costs tend to:
The circular flow of economic activity is a model of the:
The circular flow of economic activity is a model of the:
Which of the following best characterizes the circular flow of income?
Which of the following best characterizes the circular flow of income?
In the circular flow diagram, goods and services:
In the circular flow diagram, goods and services:
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In the circular flow diagram, payments for goods and services:
In the circular flow diagram, payments for goods and services:
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The respective payments for capital, entrepreneurship, land, and labor are:
The respective payments for capital, entrepreneurship, land, and labor are:
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Currently, it is not possible to produce at:
Currently, it is not possible to produce at:
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An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:
An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:
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Along the production possibilities curve, the most efficient point of production depicted is:
Along the production possibilities curve, the most efficient point of production depicted is:
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The most inefficient point depicted is:
The most inefficient point depicted is:
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A movement from Point B to Point C:
A movement from Point B to Point C:
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A movement from Point G to Point F:
A movement from Point G to Point F:
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A movement from Point C to Point B:
A movement from Point C to Point B:
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At Point A:
At Point A:
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A production possibilities curve is negatively sloped because:
A production possibilities curve is negatively sloped because:
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The concavity (bowed-out shape) of the production possibilities curve is the result of:
The concavity (bowed-out shape) of the production possibilities curve is the result of:
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A technological advance that increases the productivity of all inputs is best illustrated as:
A technological advance that increases the productivity of all inputs is best illustrated as:
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Economic growth can be illustrated by:
Economic growth can be illustrated by:
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The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of:
The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of:
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A point beyond the boundary of an economy's production possibilities curve is:
A point beyond the boundary of an economy's production possibilities curve is:
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Consumer sovereignty describes how individual consumers in market economies determine what is to be produced.
Consumer sovereignty describes how individual consumers in market economies determine what is to be produced.
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Command economies rely on central planning, where decisions about what and how many are largely determined by a government official associated with the central planning organization.
Command economies rely on central planning, where decisions about what and how many are largely determined by a government official associated with the central planning organization.
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All economies, regardless of political structure, must decide how, from several possible ways, to produce the goods and services that they want.
All economies, regardless of political structure, must decide how, from several possible ways, to produce the goods and services that they want.
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In any economy, it would always be less efficient to dig ditches by having many workers use their hands than to use workers with shovels or a backhoe.
In any economy, it would always be less efficient to dig ditches by having many workers use their hands than to use workers with shovels or a backhoe.
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Each nation tends to use the production processes that conserve its relatively scarce (and thus relatively more expensive) resources and use more of its relatively abundant resources.
Each nation tends to use the production processes that conserve its relatively scarce (and thus relatively more expensive) resources and use more of its relatively abundant resources.
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In a market economy, with private ownership and control of the means of production, the amount of output one is able to obtain depends on the quantity and quality of the scarce resources that the individual controls.
In a market economy, with private ownership and control of the means of production, the amount of output one is able to obtain depends on the quantity and quality of the scarce resources that the individual controls.
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The market where households sell the use of their inputs to firms is called the product market.
The market where households sell the use of their inputs to firms is called the product market.
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The circular flow model illustrates the continuous flow of goods, services, inputs, and payments between firms and households.
The circular flow model illustrates the continuous flow of goods, services, inputs, and payments between firms and households.
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With a straight-line production possibilities curve, the opportunity cost of producing another unit of a good increases with its output.
With a straight-line production possibilities curve, the opportunity cost of producing another unit of a good increases with its output.
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The economy cannot produce beyond the levels indicated by the production possibilities curve during a given time period, but it is possible to operate inside the production possibilities curve.
The economy cannot produce beyond the levels indicated by the production possibilities curve during a given time period, but it is possible to operate inside the production possibilities curve.
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Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve.
Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve.
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We all have an interest in the efficient use of all of society's resources because more of everything we care about can be available for our use as a result.
We all have an interest in the efficient use of all of society's resources because more of everything we care about can be available for our use as a result.
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If resources are being used efficiently, at a point along a production possibilities curve, more of one good or service requires the sacrifice of another good or service as a cost.
If resources are being used efficiently, at a point along a production possibilities curve, more of one good or service requires the sacrifice of another good or service as a cost.
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The basic reason for increasing opportunity cost is that some resources and skills cannot be easily adapted from their current uses to alternative uses.
The basic reason for increasing opportunity cost is that some resources and skills cannot be easily adapted from their current uses to alternative uses.
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Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.
Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.
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An economy can grow despite a lack of qualitative and quantitative improvements in the factors of production.
An economy can grow despite a lack of qualitative and quantitative improvements in the factors of production.
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Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods.
Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods.
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From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.
From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.
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Which of the following is not a question that all societies must answer?
Which of the following is not a question that all societies must answer?
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Economic disputes over the distribution of income are generally associated with which economic question?
Economic disputes over the distribution of income are generally associated with which economic question?
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Three economic questions must be determined in all societies. What are they?
Three economic questions must be determined in all societies. What are they?
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The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic of?
The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic of?
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The degree of government involvement in the economy is greatest in?
The degree of government involvement in the economy is greatest in?
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When a command economy is utilized to resolve economic questions regarding the allocation of resources, then?
When a command economy is utilized to resolve economic questions regarding the allocation of resources, then?
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In a circular flow diagram?
In a circular flow diagram?
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Which of the following is true?
Which of the following is true?
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In the circular flow model?
In the circular flow model?
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A point beyond the boundary of an economy's production possibilities curve is?
A point beyond the boundary of an economy's production possibilities curve is?
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Which of the following is consistent with the implications of the production possibilities curve?
Which of the following is consistent with the implications of the production possibilities curve?
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Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players if?
Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players if?
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What determines the position and shape of a society's production possibilities curve?
What determines the position and shape of a society's production possibilities curve?
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Which of the following is the most accurate statement about a production possibilities curve?
Which of the following is the most accurate statement about a production possibilities curve?
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Which of the following is most likely to shift the production possibilities curve outward?
Which of the following is most likely to shift the production possibilities curve outward?
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Which of the following is least likely to shift the production possibilities curve outward?
Which of the following is least likely to shift the production possibilities curve outward?
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Inefficiency is best illustrated by which of the following?
Inefficiency is best illustrated by which of the following?
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Suppose Country A produces few consumption goods and many investment goods while Country B produces few investment goods and many consumption goods. Other things being equal, you would expect?
Suppose Country A produces few consumption goods and many investment goods while Country B produces few investment goods and many consumption goods. Other things being equal, you would expect?
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A virulent disease spreads throughout the population of an economy, causing death and disability. This event can be portrayed as?
A virulent disease spreads throughout the population of an economy, causing death and disability. This event can be portrayed as?
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Say that a technological change doubles an economy's ability to produce good X and triples the economy's ability to produce good Y. As a result?
Say that a technological change doubles an economy's ability to produce good X and triples the economy's ability to produce good Y. As a result?
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What are the three basic economic questions?
What are the three basic economic questions?
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How are decisions made differently in a market economy than in planned economies?
How are decisions made differently in a market economy than in planned economies?
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Identify where the appropriate entries go in the circular flow diagram.
Identify where the appropriate entries go in the circular flow diagram.
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Study Notes
Consumer Sovereignty & Economic Systems
- Consumer sovereignty indicates that individual consumers dictate production in market economies.
- Command economies operate under central planning, with government officials making key production decisions.
- All economies must address how to efficiently produce desired goods and services.
Production Efficiency
- Using advanced tools (like shovels or machines) increases efficiency over manual labor.
- Nations favor production methods that utilize abundant resources while conserving scarce resources.
Market & Circular Flow Model
- The circular flow model represents the ongoing exchange of goods, services, inputs, and payments among households and firms.
- Households provide inputs to firms through the factor market, not the product market.
- Within the circular flow, firms demand resources and supply products.
Production Possibilities Curve (PPC)
- The PPC shows the maximum possible output of two goods; operating beyond this curve is unattainable.
- Efficient resource use is depicted by points on the PPC, while underutilization occurs inside the curve.
- Moving along the PPC to produce more of one good requires sacrificing some of another, indicating opportunity cost.
Opportunity Costs & Economic Growth
- Opportunity costs rise as resource allocation shifts due to factors that cannot easily be transitioned between different uses.
- Economic growth is achieved by increasing investment in capital goods, expanding future production capacities.
Economic Distribution Questions
- Societies must answer which goods to produce, how to produce them, and who receives them.
- Debate on income distribution primarily revolves around who will receive the goods produced.
- Market economies answer these questions through decentralized decision-making, unlike planned economies which rely on central authorities.
Resource Allocation & Efficiency
- Inefficient use of resources often occurs with unemployment, causing potential production losses.
- Technological advancements are likely to shift the PPC outward, indicating growth potential.
Circular Flow Dynamics
- In the circular flow diagram, households and firms interact through the buying and selling of resources and goods/services.
- Payments for goods and services flow in a counterclockwise direction, contrasting with the flow of goods and services which circulates clockwise.
Economic Systems Characteristics
- A market economy relies on private ownership and market mechanisms for resource allocation.
- Command economies allocate resources through state control and planning, characterizing economies like Cuba.
Factors Influencing Production Choices
- Countries with high labor costs typically adopt capital-intensive production methods to maintain efficiency.
- Production processes are influenced by resource availability, workforce skills, technology levels, and factory quantity.
Understanding Resource Utilization
- Efficient resource use enhances societal welfare by maximizing the availability of desired goods.
- A clearly defined opportunity cost in production decisions allows economies to prioritize based on needs and resource allocation.### Factor Flows and Markets
- Economic flows in resource markets progress in a counterclockwise direction.
- Firms receive inputs (factors of production) in the factor market.
- Key factors of production include capital, entrepreneurship, land, and labor.
Payments for Factors of Production
- Payments that correspond to the factors of production are:
- Interest for capital
- Profits for entrepreneurship
- Rent for land
- Wages and salaries for labor.
Production Possibilities Curve (PPC)
- Point E on the PPC is currently unattainable with existing resources.
- Layoffs in the bread industry indicate a shift from full employment, moving from Point C to Point F.
- All points on the PPC, including Points B, C, and D, are equally efficient in production.
Inefficiency and Efficiency in Production
- Point G represents the most inefficient point on the PPC.
- A movement from Point B to Point C represents a sacrifice of wine for a greater quantity of bread.
- A shift from Point G to Point F implies increased efficiency without sacrificing output.
Opportunity Costs and Production Sacrifices
- Moving from Point C to Point B involves sacrificing bread for more wine.
- At Point A, only wine is produced; no bread is generated.
- The PPC is negatively sloped because increasing production of one good necessitates a reduction in the other.
The Nature of the Production Possibilities Curve
- The concave (bowed-out) shape of the PPC results from the law of increasing opportunity costs.
- Economic growth is depicted by an outward shift of the PPC, indicating enhanced production capabilities.
Economic Systems
- A market economy is characterized by private property ownership and market-driven coordination of economic activities.
- Points beyond the PPC boundary are defined as unattainable, representing production goals that cannot be achieved with current resources.
Studying That Suits You
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Description
Prepare for your economics exam with these Chapter 3 flashcards! This study guide covers key concepts such as consumer sovereignty and command economies, helping you understand how decisions are made in different economic systems. Test your knowledge and grasp the essentials of market and planned economies.
