ECO 201 Chapter 2 The Economic Problem Questions Answered Correctly
Absolute Advantage - Answers A person who is more productive than others.
Allocative Efficiency - Answers When goods and services are produced at the lowest possible cost and in
the quantities that provide the greatest benefit.
Capital Accumulation - Answers The growth of capital resources.
Comparative Advantage - Answers When a person can perform an activity at a lower opportunity cost
than anyone else.
Economic Growth - Answers The expansion of production possibilities.
Firm - Answers An economic unit that hires factors of production and organizes them to produce and
sell goods and services.
Marginal Benefit - Answers The benefit received from consuming one more unit of it.
Marginal Benefit Curve - Answers A curve that shows the relationship between the marginal benefit
from a good and the quantity consumed of that good.
Marginal Cost - Answers The opportunity cost of producing one more unit of it.
Market - Answers Any arrangement that enables buyers and sellers to get information and to do
business with each other.
Money - Answers Any commodity or token that is generally acceptable as a means of payment.
Opportunity Cost - Answers The highest-valued alternative forgone of an action.
Preferences - Answers People's likes and dislikes and the intensity of those feelings.
Production Efficiency - Answers Producing goods and services at the lowest possible cost.
Production Possibilities Frontier - Answers (PPF) The boundary between those combinations of goods
and services that can be produced and those that cannot.
Property Rights - Answers The social arrangements that govern the ownership, use, and disposal of
anything that people value.
Technological Change - Answers The development of new goods and of better ways of producing goods
and services.
Absolute Advantage - Answers A person who is more productive than others.
Allocative Efficiency - Answers When goods and services are produced at the lowest possible cost and in
the quantities that provide the greatest benefit.
Capital Accumulation - Answers The growth of capital resources.
Comparative Advantage - Answers When a person can perform an activity at a lower opportunity cost
than anyone else.
Economic Growth - Answers The expansion of production possibilities.
Firm - Answers An economic unit that hires factors of production and organizes them to produce and
sell goods and services.
Marginal Benefit - Answers The benefit received from consuming one more unit of it.
Marginal Benefit Curve - Answers A curve that shows the relationship between the marginal benefit
from a good and the quantity consumed of that good.
Marginal Cost - Answers The opportunity cost of producing one more unit of it.
Market - Answers Any arrangement that enables buyers and sellers to get information and to do
business with each other.
Money - Answers Any commodity or token that is generally acceptable as a means of payment.
Opportunity Cost - Answers The highest-valued alternative forgone of an action.
Preferences - Answers People's likes and dislikes and the intensity of those feelings.
Production Efficiency - Answers Producing goods and services at the lowest possible cost.
Production Possibilities Frontier - Answers (PPF) The boundary between those combinations of goods
and services that can be produced and those that cannot.
Property Rights - Answers The social arrangements that govern the ownership, use, and disposal of
anything that people value.
Technological Change - Answers The development of new goods and of better ways of producing goods
and services.
