Chapter 2 - Models and Gains from Trade

Question 1

Positive Statement

Accepted Answer

A statement that can be tested and validated; it describes "what is"

Question 2

Normative Statement

Accepted Answer

An opinion that cannot be tested or validated; it describes "what ought to be"

Question 3

Ceteris Paribus

Accepted Answer

"Other things being equal" Everything should be constant besides the changing independent variable

Question 4

Endogenous Factors

Accepted Answer

The variables that can be controlled for in a model

Question 5

Exogenous Factors

Accepted Answer

All variables that cannot be controlled for in a model

Question 6

Production Possibilities Frontier

Accepted Answer

A model that illustrates the combinations of outputs that a society can produce if all its resources are being used efficiently

Question 7

Law of Increasing Opportunity Cost

Accepted Answer

States that the opportunity cost of producing a good rises as a society produces more of it

Question 8

Specialization

Accepted Answer

The limiting of one's work to a particular area

Question 9

Absolute Advantage

Accepted Answer

Refers to the ability of one producer to make more than another producer with the same quantity of resources

Question 10

Consumer Goods

Accepted Answer

Produced for present consumption

Question 11

Capital Goods

Accepted Answer

Help produce other valuable goods and services in the future

Question 12

Investment

Accepted Answer

The process of using resources to create or buy new capital

Alle Karten