ECON 102 CHAPTER 2 QUESTIONS WITH COMPLETE SOLUTIONS

3 Basic Economic Questions CORRECT ANSWER What gets produced? How is it produced? Who gets what is produced? Primary Resources CORRECT ANSWER land, labor, capital Capital CORRECT ANSWER Anything that has already been produced that will be used to produce other valuable goods or services over time Factors of Production (factors) CORRECT ANSWER The inputs into the process of production. AKA resources Production CORRECT ANSWER The process that transforms scarce resources into useful goods and services Inputs or resources CORRECT ANSWER Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants Outputs CORRECT ANSWER Goods and services of value to households Theory of Comparative Advantage CORRECT ANSWER Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers Absolute Advantage CORRECT ANSWER A producer has an ______ advantage over another in the production of a good or service if he or she can produce that product using fewer resources (a lower absolute cost per unit) Comparative advantage CORRECT ANSWER A producer has a ______ advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost Consumer Goods CORRECT ANSWER Goods produced for present consumption