Labor, capital, natural resources, entrepreneurial ability, wages, interest, rent, and profit are commonly called:

resources or factors of production

The term macroeconomics generally refers to

how the national economy behaves

The Latin word ceteris paribus means

all other things held constant

A fallacy of composition is

the assumption that what is true for the individual is also true for everyone else

In Exhibit II on pg 31, if all the economy's resources are used efficiently to produce consumer goods, then the economy is at point


Which of the following points in Exhibit II (pg 31) is unattainable, given the quantity of resources and level of technology?


Which of the following points in Exhibit 2 (pg 31) represents an inefficient use of the economy's resources?


Point U in Exhibit 2 (pg 31) represents

an unattainable combination of good consumer and capital goods

Point I in Exhibit 2 (pg 31) represents

an inefficient combination of the two goods

Points inside the production possibilities frontier represent

inefficiency or unemployment (or both)

What's the difference between an opportunity cost and a sunk cost?

An opportunity cost is what we forgo with one decision and a sunk cost is a cost that can't be recovered.

The typical concave (i.e., bowed-out) shape of the production possibilities frontier reflects the law of increasing opportunity cost.


If we give-up mowing the neighbor's lawn fro $50 to watch TV, what is the opportunity cost of goofing-off?


Which of the following macroeconomic occurrences could shift a country's production-possibilities curve to the right (thus, increase its GDP)?

changes in resource availability
increases in capital stock
technological change
Improvement to the rules of the game