Producing things production is any activity that

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Macroeconomics
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Chapter 14 / Exercise 10
Macroeconomics
Roger A. Arnold
Expert Verified
Producing Things: Production is any activity that results in the conversion of resources into products that can be used in consumption. Resources (or Factors of Production) are inputs that are used to produce things that people want and include: • Land – Natural resources or the gifts of nature • Labor – The human resource • Physical Capital – All manufactured resources used to produce something else • Human Capital – Accumulated training and education of workers • Entrepreneurship – The human resource who organizes, manages, assembles the other resources, and is the maker of basic business policy decisions Production Possibilities Curve (PPC) The production possibilities curve (PPC) represents all possible combinations of maximum outputs that could be produced, assuming a fixed amount of productive resources of a given quality. Look at Figure 2.1. What would happen if you are more interested in getting a higher grade in economics? The trade- off is a lower grade in math. Holding constant total study time: What would happen to the PPC if you spent more time studying? You would be increasing a resource (human capital), which would shift the PPC rightward. In this example, the trade-offs are shown with a straight-line PPC: Is it possible that the terms of the trade-off might not be constant? Yes, we may have a PPC that is bowed-outwards. Specialization and Greater Productivity Specialization is the organization of economic activity among different individuals and regions, and it leads to greater productivity. Rational individuals choose their comparative advantage and then specialize. Specialization leads to division of labor. Nations also specialize where they have a comparative advantage and then trade with the rest of the world. And as economic efficiency improves, output increases, and the average standard of living rises. Comparative Advantage: Comparative advantage is the ability to produce a good or service at a lower opportunity cost, and it is always a relative concept. Absolute advantage is the ability to
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Macroeconomics
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Chapter 14 / Exercise 10
Macroeconomics
Roger A. Arnold
Expert Verified
produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, it is the ability to produce the same quantity of a good or service using fewer units of labor or resource inputs. Analysis of absolute advantage, comparative advantage, and specialization is applicable to individuals, groups of people, or nations. As a result, interstate trade occurs in the United States, and international trade occurs between nations. Division of Labor: Division of Labor is the segregation of resources into different specific tasks. For example, in automobile production, one worker puts on bumpers, another work puts on doors, and so on.
Module 2 Notes 139. Unemployment benefit overview.

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