Ch. 2

• What are the factors of production?

  Labour, capital, land, and enterprise
• What does opportunity cost represent in decision making?

  The value of the next-best alternative forgone
• What does the production possibility curve (PPC) illustrate?

  Maximum combinations of goods produced
• What is a trade-off?

  A choice requiring the sacrifice of another
• What are capital goods?

  Goods used in the production process
• What are consumer goods?

  Goods produced for present use or consumption
• What is long-run economic growth?

  Expansion in the productive capacity of the economy
• Who coined the term "invisible hand"?

  Adam Smith
• What does the term "invisible hand" refer to?

  How resources are allocated in a market economy
• What is specialization in production?

  Concentrating on a task to become expert
• What is division of labour?

  Breaking production into stages for workers
• What is a market?

  A set of arrangements for transactions
• What is a barter system?

  An economy without money relying on direct exchange
• What is the function of money as a medium of exchange?

  Enables transactions to take place