AP Microeconomics Chapter 2 - Custom Scholars
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AP Microeconomics Chapter 2

question
economizing problem
answer
the choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce)
question
scarce resources
answer
the limited quantities of land, labor, capital, and entrepreneurial ability that are never sufficient to satisfy people's virtually unlimited economic wants
question
economic resources
answer
the land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production
question
land
answer
natural resources ("free gifts of nature") used to produce goods and services
question
capital goods
answer
human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants
question
labor
answer
people's physical and mental talents and efforts that are used to help produce goods and services
question
entrepreneurial ability
answer
the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks
question
factors of production
answer
economic resources: land, capital, labor, and entrepreneurial ability
question
full production
answer
employment of available resources so that the maximum amount of (or total value of) goods and services is produced; occurs when both productive efficiency and allocative efficiency are realized
question
productive efficiency
answer
the production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs
question
allocative efficiency
answer
the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal
question
fixed resource
answer
any resource whose quantity cannot be changed by a firm in the short run
question
consumer goods
answer
products and services that satisfy human wants directly
question
production possibilities curve
answer
a curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies or resources and technology are fixed
question
opportunity cost
answer
the amount of other products that must be forgone or sacrificed to produce a unit of a product
question
law of increasing opportunity costs
answer
the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises
question
unemployment
answer
the failure to use all available economic resources to produce desired goods and services; the failure of the economy to full employ its labor force
question
the market system
answer
all the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers (capitalism)
question
the command system
answer
a method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities (socialism, communism)
question
economic system
answer
a particular set of institutional arrangements and a coordinating mechanism
question
resource market
answer
the place where resources or the services of resource suppliers are bought and sold
question
product market
answer
the place where goods and services produced by businesses are bought and sold
question
circular flow model
answer
the flow of resources from households to firms and of products from firms to households
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question
economizing problem
answer
the choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce)
question
scarce resources
answer
the limited quantities of land, labor, capital, and entrepreneurial ability that are never sufficient to satisfy people's virtually unlimited economic wants
question
economic resources
answer
the land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production
question
land
answer
natural resources ("free gifts of nature") used to produce goods and services
question
capital goods
answer
human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants
question
labor
answer
people's physical and mental talents and efforts that are used to help produce goods and services
question
entrepreneurial ability
answer
the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks
question
factors of production
answer
economic resources: land, capital, labor, and entrepreneurial ability
question
full production
answer
employment of available resources so that the maximum amount of (or total value of) goods and services is produced; occurs when both productive efficiency and allocative efficiency are realized
question
productive efficiency
answer
the production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs
question
allocative efficiency
answer
the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal
question
fixed resource
answer
any resource whose quantity cannot be changed by a firm in the short run
question
consumer goods
answer
products and services that satisfy human wants directly
question
production possibilities curve
answer
a curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies or resources and technology are fixed
question
opportunity cost
answer
the amount of other products that must be forgone or sacrificed to produce a unit of a product
question
law of increasing opportunity costs
answer
the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises
question
unemployment
answer
the failure to use all available economic resources to produce desired goods and services; the failure of the economy to full employ its labor force
question
the market system
answer
all the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers (capitalism)
question
the command system
answer
a method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities (socialism, communism)
question
economic system
answer
a particular set of institutional arrangements and a coordinating mechanism
question
resource market
answer
the place where resources or the services of resource suppliers are bought and sold
question
product market
answer
the place where goods and services produced by businesses are bought and sold
question
circular flow model
answer
the flow of resources from households to firms and of products from firms to households
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