KEY CONCEPTS

Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.

Question

production
resources
land
labor
capital
entrepreneurs
incentives
production efficiency
allocative efficiency
production possibilities frontier (PPF)
opportunity cost
absolute advantage
comparative advantage
One country has a lower opportunity cost of producing a good than another country.
The factors that motivate individuals and firms to make decisions in their best interest.
One country can produce more of a good than another country.
Productive resources include land (land and natural resources), labor (mental and physical talents of people), capital (manufactured products used to produce other products), and entrepreneurial ability (the combining of the other factors to produce products and assume the risk of the business).
Includes natural resources such as mineral deposits, oil, natural gas, water, and land in the usual sense of the word. The payment for land used as a resource is rent.
The mix of goods and services produced is just what the society desires.
Shows the combinations of two goods that are possible for a society to produce at full employment. Points on or inside the PPF are attainable, and those outside of the frontier are unattainable.
Entrepreneurs combine land, labor, and capital to produce goods and services. They absorb the risk of being in business, including the risk of bankruptcy and other liabilities associated with doing business. Entrepreneurs receive profits for their effort.
The cost paid for one product in terms of the output (or consumption) of another product that must be forgone.
The process of converting resources (factors of production)—land, labor, capital, and entrepreneurial ability—into goods and services.
Includes manufactured products such as tractors, welding equipment, and computers that are used to produce other goods and services. The payment for capital is interest.
Includes the mental and physical talents of individuals who produce products and services. The payment to labor is wages.
Goods and services are produced at their lowest resource (opportunity) cost.
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