Podcast
Questions and Answers
What is a critical function of the government in facilitating the operation of a market economy?
What is a critical function of the government in facilitating the operation of a market economy?
setting up and enforcing private property rights
A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.
A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.
True
A production possibilities frontier with a ____ shape indicates increasing opportunity costs as more and more of one good is produced.
A production possibilities frontier with a ____ shape indicates increasing opportunity costs as more and more of one good is produced.
bowed outward
What does Adam Smith's concept refer to when individuals acting in their own self-interest bring about a market outcome that benefits society?
What does Adam Smith's concept refer to when individuals acting in their own self-interest bring about a market outcome that benefits society?
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What can cause an outward shift of a nation's production possibilities frontier?
What can cause an outward shift of a nation's production possibilities frontier?
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As job opportunities for women increase, the opportunity cost of doing housework has ___, leading many families to hire specialists.
As job opportunities for women increase, the opportunity cost of doing housework has ___, leading many families to hire specialists.
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As job opportunities for women increase, the cost of hiring specialists is ___ than the cost of traditional housework.
As job opportunities for women increase, the cost of hiring specialists is ___ than the cost of traditional housework.
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If Carmelita performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures?
If Carmelita performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures?
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What does comparative advantage mean?
What does comparative advantage mean?
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How is economic growth represented on a production possibilities frontier model?
How is economic growth represented on a production possibilities frontier model?
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Which country has the comparative advantage in wine if Italy can produce a bottle of wine giving up 10 pounds of cheese and France gives up 25 pounds of cheese?
Which country has the comparative advantage in wine if Italy can produce a bottle of wine giving up 10 pounds of cheese and France gives up 25 pounds of cheese?
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If property rights are not well enforced, a significant number of people will be willing to risk their funds by investing them in local businesses.
If property rights are not well enforced, a significant number of people will be willing to risk their funds by investing them in local businesses.
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According to economic reasoning, if the best lawyer in town is also the best at operating a word processor, they should specialize in what?
According to economic reasoning, if the best lawyer in town is also the best at operating a word processor, they should specialize in what?
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If the production possibilities frontier is linear, then opportunity costs are constant as more of one good is produced.
If the production possibilities frontier is linear, then opportunity costs are constant as more of one good is produced.
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Can individuals who have never been the best at doing anything have a comparative advantage?
Can individuals who have never been the best at doing anything have a comparative advantage?
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What was published in 1776 and written by Adam Smith?
What was published in 1776 and written by Adam Smith?
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Specializing in the production of a good where one has a comparative advantage enables a country to do what?
Specializing in the production of a good where one has a comparative advantage enables a country to do what?
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What is the opportunity cost of going to college this term if tuition is $5000, room and board is $3000, books are $500, and potential earnings are $10000?
What is the opportunity cost of going to college this term if tuition is $5000, room and board is $3000, books are $500, and potential earnings are $10000?
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What is the opportunity cost of taking an online history class?
What is the opportunity cost of taking an online history class?
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How would the recession of 2007-2009 be represented in a production possibilities frontier graph?
How would the recession of 2007-2009 be represented in a production possibilities frontier graph?
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What does the slope of a production possibilities frontier measure?
What does the slope of a production possibilities frontier measure?
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To increase gas mileage, auto manufacturers make cars small and light. Large cars yield lower gas mileage, suggesting a positive relationship exists between safety and gas mileage.
To increase gas mileage, auto manufacturers make cars small and light. Large cars yield lower gas mileage, suggesting a positive relationship exists between safety and gas mileage.
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Which of the following is a factor of production?
Which of the following is a factor of production?
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Without technological advancement, how can a nation achieve economic growth?
Without technological advancement, how can a nation achieve economic growth?
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An outward shift of a nation's production possibilities frontier represents ___ economic growth.
An outward shift of a nation's production possibilities frontier represents ___ economic growth.
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Adam Smith's ___ behavioral assumption about humans suggests that people usually act in a rational, self-interested way.
Adam Smith's ___ behavioral assumption about humans suggests that people usually act in a rational, self-interested way.
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Study Notes
Government and Market Economy
- A critical government role in a market economy is setting up and enforcing private property rights.
Unemployment and Production Possibilities
- A decrease in the unemployment rate can move the economy from inside the production possibilities frontier to a point on the frontier.
Production Possibilities Frontier (PPF)
- A bowed outward shape of a PPF indicates increasing opportunity costs as production shifts between goods.
Adam Smith's Concepts
- Adam Smith introduced the "invisible hand," describing how self-interested individuals can lead to socially beneficial market outcomes.
Factors Influencing Growth
- An increase in the labor force can cause an outward shift of a nation’s production possibilities frontier.
Opportunity Costs in Housework
- With rising job opportunities and wages for women, the opportunity cost of doing housework has increased, leading many families to hire specialists for household chores at lower costs.
Opportunity Cost Calculation
- For Carmelita, the opportunity cost of performing 15 additional manicures is 25 pedicures.
Comparative Advantage
- Comparative advantage exists when a producer can create a good or service at a lower opportunity cost than others.
Economic Growth Representation
- Economic growth on a PPF model is shown by the production possibility frontier shifting outward.
Comparative Advantage Example
- Italy has a comparative advantage in wine production compared to France, which trades off more cheese for wine.
Property Rights and Investment
- Poor enforcement of property rights can discourage investment in local businesses.
Specialization for Efficiency
- The best lawyer should specialize in law since it has a lower opportunity cost compared to operating a word processor.
Linear PPF Implications
- A linear production possibilities frontier indicates constant opportunity costs as production levels change.
Comparative Advantage for All
- Individuals who are not the best at anything can still have a comparative advantage in certain productions.
Adam Smith's Publication
- In 1776, Adam Smith published "An Inquiry into the Nature and Causes of the Wealth of Nations."
Specialization Benefits
- Specializing in a good or service where there is a comparative advantage allows a country to consume beyond its production possibilities frontier.
College Opportunity Cost
- The opportunity cost of attending college includes tuition, room, board, books, and the foregone salary, totaling $11,500.
Opportunity Cost of Classes
- The opportunity cost of taking an online history class equates to the highest value of alternative uses for the time and money spent on it.
Recession Representation
- The 2007-2009 recession can be illustrated as a point inside the production possibilities frontier.
PPF Slope Significance
- The slope of a production possibilities frontier reflects the opportunity cost of producing an additional unit of a good.
Safety and Gas Mileage Relationship
- There is no positive relationship between the size of cars and gas mileage; it is false that larger cars yield better gas mileage.
Factors of Production
- An acre of forested land is classified as a factor of production.
Economic Growth Without Technology
- Nations can achieve economic growth without technological advancements by increasing the supply of production factors.
Economic Growth Indicator
- An outward shift of a nation's production possibilities frontier signifies economic growth.
Rational Economic Behavior
- Adam Smith's behavioral assumption was that individuals act in rational, self-interested ways.
Studying That Suits You
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Description
Test your understanding of key economic concepts with these flashcards covering fundamental ideas in market economy and production possibilities. Perfect for reviewing essential terms and true/false questions essential for Economics students.
