A n s w e r s t o R e v i e w Q u i z z e s
|
|
- Colleen Kelly
- 6 years ago
- Views:
Transcription
1 THE ECONOMIC PROBLEM Chapter 2 The Economic Problem A n s w e r s t o R e v i e w Q u i z z e s Page The unattainable combinations of production that lie beyond the PPF curve illustrate the concept of scarcity. There simply are not enough resources to produce any of these combinations of outputs. 2. The combinations of outputs that lie on the PPF curve illustrate the concept of production efficiency. Points on the frontier indicate that increasing the production of one good requires decreasing the production of another good, which is the definition of production efficiency. Any point inside the frontier reflects a combination of outputs where one or both outputs may be increased without decreasing the other output level. Clearly, such points cannot be production efficient. 3. Movement along the PPF frontier illustrates that producing more of one good requires that less of the other good be produced. This is the tradeoff that must be made when producing output efficiently. 4. The negative slope of the production possibility curve illustrates the concept of opportunity cost. Moving along the production possibility frontier, producing additional units of a good requires that the output of another good must fall. This sacrifice is the opportunity cost of producing more of the first good. 5. The slope of the PPF is a ratio that expresses the quantity of lost production of one good when increasing the units of the other good produced. The steeper the slope, the greater ratio, and the greater is the opportunity cost of increasing the output of the good measured along the horizontal axis. 6. Some resources are better suited to produce one type of good or service, like CDs. Other resources are better suited to produce other goods or services, like pizza. If society allocates resources wisely, it will use each resource to produce the kind of output for which it is best suited. A small increase in CD output when CD production is relatively low requires only small increases in the use of those resources still good at making CD and not good at making pizzas. This yields a small decrease in pizza production for a large increase in CD production, creating a relatively low opportunity cost reflected in the gentle slope of the PPF curve over this range of output. However, the same small increases in CD output when CD production is relatively large will require society to devote to CD production those resources that are less suited to making CD and more suited at making pizzas. This reallocation of resources yields a relatively small increase in CD output for a large decrease in pizza output, creating a relatively high opportunity cost reflected in the steep slope of the PPF curve over this range of output. The opportunity cost of CD production increases with the quantity of CD produced as the slope of the PPF curve becomes ever steeper, creating the bowed out effect (the concavity of the PPF function). Page Marginal cost is the opportunity cost of producing one more unit of a good or service and is reflected in the slope of the PPF curve. 2. The marginal benefit of a good or service is the benefit received from the last unit consumed. It is measured by what an individual is willing to give up (or pay) for that last unit. 3. As the more of a good is consumed, the marginal benefit received from each unit is smaller than the marginal benefit received from the unit consumed immediately before it, and is larger than the marginal benefit from the unit consumed immediately after it. This is known as decreasing marginal benefits and is often assumed by economists to be a common characteristic of an individual s preferences over most goods and services in the economy.
2 CHAPTER 2 4. Production efficiency occurs when production takes place at a point on the PPF curve. This indicates that all available resources are being used for production and society cannot produce additional units of one good or service without reducing the output of another good or service. 5. Resources are used efficiently when more of one good or service cannot be produced without producing less of some of another good or service that is valued more highly. This is known as allocative efficiency and it occurs when: 1) production efficiency is achieved, and 2) the marginal benefit received from the last unit produced is equal to the marginal cost for producing the last unit. Page The two key factors that generate economic growth are technological change the development of new goods and of better ways of producing goods and services and capital accumulation the growth of capital resources. 2. Economic growth is the expansion of production possibilities. It shifts the production possibility frontier outward. 3. The opportunity cost of economic growth is forgone current consumption. To make economic growth happen we must devote more resources to producing capital goods today and produce fewer consumption goods today. The decrease in today s consumption is the opportunity cost of an increase in future consumption. 4. Hong Kong has devoted a greater proportion of its resources to the production of capital goods than Canada. As a result, Hong Kong has grown at a faster rate. By forgoing consumption and producing a greater proportion of capital goods, Hong Kong has been able to achieve the same PPF per person as Canada. Page Comparative advantage occurs when one person can perform an activity at a lower opportunity cost than anyone else. 2. A person has an absolute advantage if they can produce more of all goods than anyone else. A person has a comparative advantage when they can perform an activity at a lower opportunity cost than anyone else. When a person has an absolute advantage in all goods they do not have a comparative advantage in all goods. 3. If all people are being productive and are pursuing their respective comparative advantage, then production takes place on the PPF curve. Production on the PPF curve indicates that production efficiency is achieved, such that increases in output of one good or service cannot be achieved without a decrease in another good or service. 4. By specialization and trade, both parties can get outside their production possibility frontiers. Both parties can consume more than they could before the specialization and trade occurred. The opportunity cost of the good that one person obtains from the other person is less than if they produced that good themselves. 5. From society's standpoint, the total output of goods and services available for consumption is greater under specialization and trade. From an individual's perspective, each person who specializes enjoys being able to consume a more complex and larger bundle of goods and services after trading with others who have also specialized than would otherwise be possible under self-sufficiency. 6. The source of the gains from specialization and trade are the different opportunity costs of producing goods for different people. Because some people are better at producing one type of good and others are better at producing another type of good, the opportunity cost of producing different goods varies among people. If people specialize in producing the goods in which they have a comparative advantage and then trade, they will achieve the gains from specialization and trade. 2
3 THE ECONOMIC PROBLEM 7. Dynamic comparative advantage is a comparative advantage that a person (or country) possesses as a result of having specialized in a particular activity. It arises by learning-by-doing and as a result the person (or country) become the producer with the lowest opportunity cost. Page Without markets and property rights, people could not enjoy the gains from specialization and trade. Markets enable buyers and sellers to get information and do business with each other. Property rights guarantee that a producer will be able to acquire the gains from his production. Without this guarantee, there would be no motivation to produce goods and services because producers might find that their production was taken from them without compensation. 2. Markets enable buyers and sellers to get information and do business with each other. Markets coordinate decisions. In goods markets, changes in prices coordinate peoples decisions about how much of a good to buy with firms decisions about how much to sell. In resource markets, changes in prices coordinate people s decisions about how many resources to sell with firms decisions about how many resources to buy. 3. Goods and services are a real flow from firms to households. Income is a money flow from firms to households. 3
4 CHAPTER 2 W o r k s h e e t W i t h o u t A n s w e r s 1. An article in the Wall Street Journal highlighted the intensifying struggle between the U.S. Customs and the U.S. Commerce department in the post-9/11 environment: These bureaucratic arguments reflect a much broader national struggle between business interests and security advocates. When the federal government limits immigration, for example, it rubs against companies desire for both skilled and unskilled labourers. When the Justice Department issues terrorist alerts for shopping malls, it knows it may drive down retail sales. Financial institutions complain that new regulations to crack down on money laundering can slow the legitimate flow of money and create new costs. One new Customs proposal would require advance notice of what s going into U.S.-bound shipping containers at least 24 hours before they are loaded in foreign ports. That plan, the shippers say, will be expensive and cause backups. (Cummings, Jeanne and McKinnon, John D., New Budget Blueprint Mandates Austerity From Agencies Unrelated to Terror Fight. Wall Street Journal, January 10, 2002) To the right is a sketch a hypothetical production possibilities frontier that illustrate tradeoffs described above. The point A represents the pre-9-11 efficient point. a. Sketch a marginal benefit and marginal cost diagram, with billions of units of security per month on the horizontal axis and the marginal cost and marginal benefit, measured in all other goods per unit of security on the vertical axis. What the relationship between this diagram and the production possibilities diagram to the right? What is the pre-9-11 efficient quantity of security services? How is this quantity determined? b. How did the catastrophic events of 9-11 affect the marginal benefit and marginal cost diagram? (Hint: One of the curves shifted). Draw a diagram showing the post-9-11 marginal benefit and marginal cost diagram. What is the new efficient quantity of security services? How does this new point relate to the discussion in the Wall Street Journal article about the costs being imposed on the public from enhanced security? c. Suppose a new technology becomes available that cheaply and easily detects intent to harm by remote sensing of physiological indicators. Unobtrusive (and inexpensive) detectors would immediately alert authorities to the presence of terrorists. With the same amount of land, labour and capital as before, this technology would enable us to provide more units of security. What would be the effect of this new technology in the diagram with the production possibilities frontier and in the diagram with the marginal benefit and marginal cost curves? What happens to the efficient quantity of security? the 4
5 THE ECONOMIC PROBLEM W o r k s h e e t W i t h A n s w e r s 1. An article in the Wall Street Journal highlighted the intensifying struggle between the U.S. Customs and the U.S. Commerce department in the post-9/11 environment: These bureaucratic arguments reflect a much broader national struggle between business interests and security advocates. When the federal government limits immigration, for example, it rubs against companies desire for both skilled and unskilled labourers. When the Justice Department issues terrorist alerts for shopping malls, it knows it may drive down retail sales. Financial institutions complain that new regulations to crack down on money laundering can slow the legitimate flow of money and create new costs. One new Customs proposal would require advance notice of what s going into U.S.-bound shipping containers at least 24 hours before they are loaded in foreign ports. That plan, the shippers say, will be expensive and cause backups. (Cummings, Jeanne and McKinnon, John D., New Budget Blueprint Mandates Austerity From Agencies Unrelated to Terror Fight. Wall Street Journal, January 10, 2002) To the right is a sketch a hypothetical production possibilities frontier that illustrate tradeoffs described above. The point A represents the pre-9-11 efficient point. a. Sketch a marginal benefit and marginal cost diagram, with billions of units of security per month on the horizontal axis and the marginal cost and marginal benefit, measured in all other goods per unit of security on the vertical axis. What the relationship between this diagram and the production possibilities diagram to the right? What is the pre-9-11 efficient quantity of security services? How is this quantity determined? The marginal benefit/marginal cost is to the right. The marginal cost curve at quantity of security is the absolute value slope of the PPF. The marginal benefit is the population s willingness to pay for security and is unrelated to the PPF. The 11 efficient quantity is 1 billion units of security per month and is determined by intersection of the MB and MC curves. the figure every of the curve pre-9- b. How did the catastrophic events of 9-11 affect the marginal benefit and marginal cost diagram? (Hint: One of the curves shifted). Draw a diagram showing the post marginal benefit and marginal cost diagram. What is the new efficient quantity of security services? How does this new point relate to the discussion in the Wall Street Journal article about the costs being imposed on the public from enhanced security? the 5
6 CHAPTER 2 The terrible events of 9-11 increased our willingness to pay for security and so increased the marginal benefit of security services. The marginal benefit curve shifted rightward and the efficient quantity of security services increased. In the figure, the marginal benefit curve shifted from MB 0 to MB 1 and the efficient quantity of security services increased from 1 billion units per month to 3 billion units per month. At the new efficient quantity of security services, the marginal cost of the 3 billionth security service exceeds the marginal cost of the 1 billionth service. This increase in marginal cost reflects what the Wall Street Journal reported, namely the increase in the costs imposed on shippers and financial institutions from increased security measures. c. Suppose a new technology becomes available that cheaply and easily detects intent to harm by remote sensing of physiological indicators. Unobtrusive (and inexpensive) detectors would immediately alert authorities to the presence of terrorists. With the same amount of land, labour and capital as before, this technology would enable us to provide more units of security. What would be the effect of this new technology in the diagram with the production possibilities frontier and in the diagram with the marginal benefit and marginal cost curves? What happens to the efficient quantity of security? In the production possibilities frontier diagram, the horizontal intercept moves farther outward, while the vertical intercept does not change. In the diagram with the marginal benefit and marginal cost curves, the marginal cost of security falls so that the marginal cost, MC, curve shifts rightward. The rightward shift of the MC curve means that the efficient quantity of security increases. 6
Chapter 2: The Economic Problem. McTaggart, Findlay, Parkin: Microeconomics 2007 Pearson Education Australia
Chapter 2: The Economic Problem Objectives After studying this chapter, you will be able to: Define the production possibilities frontier and calculate opportunity cost Distinguish between production possibilities
More informationInternational Trade Theory
International Trade Theory www.ashraffeps.yolasite.com Ashraf Samir Ph.D. Contents Define the production possibilities frontier Calculate opportunity cost Examining the PPF and Marginal Cost (The marginal
More informationPROBLEM. Answers to the Review Quizzes. Page 34
C h a p t e r 2 THE ECONOMIC PROBLEM Answers to the Review Quizzes Page 34 1. How does the production possibilities frontier illustrate scarcity? The unattainable combinations of production that lie beyond
More informationECON 112 L3 Week 2, T1, Fall Chapter 2 The Economic Problem
ECON 112 L3 Week 2, T1, Fall 2009 Chapter 2 The Economic Problem I. Production Possibilities Frontier The production possibilities frontier (PPF) is the boundary between those combinations of goods and
More informationTHE ECONOMIC PROBLEM. ratio, and the greater is the opportunity cost of increasing the output of the good measured along the horizontal axis.
C h a p t e r Answ e r s 2 to the Review THE ECONOMIC PROBLEM Quizzes Page 34 1. How does the production possibilities frontier illustrate scarcity? The unattainable combinations of production that lie
More information2 THE ECONOMIC PROBLEM
2 THE ECONOMIC PROBLEM Why does food cost much more today than it did a few years ago? One reason is that we now use part of our corn crop to produce ethanol, a clean biofuel substitute for gasoline.
More informationEconomics: Canada in the Global Environment, Ninth Edition Chapter 2: The Economic Problem
Chapter 2 The Economic Problem Economics: Canada in the Global Environment, Ninth Edition 2.1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier A) is the boundary between
More informationThe Economic Problem
CHAPTER 2 The Economic Problem The Big Picture Where We Have Been Chapter 1 introduced the economic reality that wants exceed the resources available to satisfy them we face scarcity. Chapter 2 has reinforced
More informationMultiple Choice Questions (please green scantron) 25 questions, 3 points per question
Homework Assignment #1 (Due 9/19, in class) Multiple Choice Questions (please green scantron) 25 questions, 3 points per question 1) Economics is best defined as the study of how people, businesses, governments,
More informationMacroeconomics, 10e (Parkin) Chapter 2 The Economic Problem. 1 Production Possibilities and Opportunity Cost
Macroeconomics, 10e (Parkin) Chapter 2 The Economic Problem 1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier is the boundary between A) those combinations of goods
More informationMicroeconomics, 10e (Parkin) Chapter 2 The Economic Problem. 1 Production Possibilities and Opportunity Cost
Microeconomics, 10e (Parkin) Chapter 2 The Economic Problem 1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier is the boundary between A) those combinations of goods
More informationMicroeconomics, 11e (Parkin) Chapter 2 The Economic Problem. 1 Production Possibilities and Opportunity Cost
Microeconomics, 11e (Parkin) Chapter 2 The Economic Problem 1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier is the boundary between A) those combinations of goods
More information2 The Economic Problem
2 The Economic Problem Production Possibilities and Opportunity Cost The production possibilities frontier (PPF) is the boundary between those combinations of goods and services that can be produced and
More informationECON 101 MIDTERM 1 REVIEW SESSION SOLUTIONS (WINTER 2015) BY BENJI HUANG
ECON 101 MIDTERM 1 REVIEW SESSION SOLUTIONS (WINTER 2015) BY BENJI HUANG TABLE OF CONTENT I. CHAPTER 1: WHAT IS ECONOMICS II. CHAPTER 2: THE ECONOMIC PROBLEM III. CHAPTER 3: DEMAND AND SUPPLY IV. CHAPTER
More informationProduction Possibilities and Opportunity Cost
Production Possibilities and Opportunity Cost 0 The production possibilities frontier (PPF) is the boundary between those combinations of goods and services that can be produced and those that cannot.
More informationChapter. The Economic Problem CHAPTER IN PERSPECTIVE
The Economic Problem Chapter CHAPTER IN PERSPECTIVE Chapter studies the production possibilities frontier, PPF. The PPF shows how the opportunity cost of a good or service increases as more of the good
More informationMr Sydney Armstrong ECN 1100 Introduction to Microeconomic Lecture Note (2)
Mr Sydney Armstrong ECN 1100 Introduction to Microeconomic Lecture Note (2) Economics Systems The market System The private ownership of resources and the use of markets and prices to coordinate and direct
More informationMicroconomics. Chapter 2 Trade-offs, Comparative Advantage, and the Market System. 6 th edition
1 Microconomics 6 th edition Chapter 2 Trade-offs, Comparative Advantage, and the Market System Modified by Yulin Hou For Principles of Microeconomics Florida International University Fall 2017 Production
More informationChapter 3 The Economic Problem
Chapter 3 The Economic Problem 3.1 Production Possibilities 1) The United States produced approximately worth of goods and services in 2004. A) $12 trillion B) $12 billion C) $120 trillion D) $120 billion
More informationCHAPTER 2 Trade-offs, Comparative Advantage, and the Market System
CHAPTER 2 Trade-offs, Comparative Advantage, and the Market System SOLUTIONS TO END-OF-CHAPTER EXERCISES Review Questions 2.1 Production Possibilities Frontiers and Opportunity Costs (pages 30 36) Learning
More informationPreview from Notesale.co.uk Page 6 of 89
Guns Butter 200 0 175 75 130 125 70 150 0 160 What it shows: the maximum combinations of two goods an economy can produce with its existing resources and technology; an economy can produce at points on
More informationWeek One What is economics? Chapter 1
Week One What is economics? Chapter 1 Economics: is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives
More informationPart II: Economic Growth. Part I: LRAS
LRAS & LONG-RUN EQUILIBRIUM - 1 - Part I: LRAS 1) The quantity of real GDP supplied at full employment is called A) hypothetical GDP. B) short-run equilibrium GDP. C) potential GDP. D) all of the above.
More informationPrinciples of Microeconomics , 10e (Case/Fair/Oster) TB2 Chapter 2 The Economic Problem: Scarcity and Choice
Principles of Microeconomics, 10e (Case/Fair/Oster) TB2 Chapter 2 The Economic Problem: Scarcity and Choice 2.1 Scarcity, Choice, and Opportunity Cost 1) Production is the process by which A) products
More informationFOR YOUR REVIEW ANSWER KEY
FOR YOUR REVIEW ANSWER KEY CHAPTER 2 SCARCITY, TRADE-OFFS, AND PRODUCTION POSSIBILITIES SECTION 2.1 THE PRODUCTION POSSIBILITIES CURVE 1. a. b. 1 side of beef; 6 kegs of beer; 9 kegs of beer c. 35 kegs
More informationTHE ECONOMIC PROBLEM. Chapter. Chapter Key Ideas
Chapter 2 THE ECONOMIC PROBLEM Chapter Key Ideas Good, Better, Best! A. For many people, life is good and getting better, but we all face costs and must choose what we think is best for us. B. This chapter
More informationFull file at
C h a p t e r 2 THE ECONOMIC PROBLEM The Big Picture Where we have been: Chapter 1 introduced the economic reality that wants exceed the resources available to satisfy them we face scarcity. Chapter 2
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The production possibilities frontier illustrates the 1) A) goods and services that people
More informationCHAPTER 2 Production Possibilities Frontier Framework
CHAPTER 2 Production Possibilities Frontier Framework Chapter 2 introduces the basics of the PPF, comparative advantage, and trade. This is not exactly a tools of economics chapter; instead it explores
More informationChapter 2 The Economic Problem: Scarcity, and Choice Principles of Macroeconomics, Case/Fair, 8e
Chapter 2 The Economic Problem: Scarcity, and Choice Principles of Macroeconomics, Case/Fair, 8e 2.1 Scarcity, Choice, and Opportunity Cost Multiple Choice 1) The process by which resources are transformed
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
HW 2 - Micro - Machiorlatti MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) What is measured by the price elasticity of supply? 1) A) The price
More informationProduction Possibilities, Opportunity Cost, and Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom questions are introduced as the fundamental economic questions that must be addressed
More informationProduction Possibilities, Opportunity Cost, and Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom questions are introduced as the fundamental economic questions that must be addressed
More informationCh. 1 LECTURE NOTES Learning objectives II. Definition of Economics III. The Economic Perspective CONSIDER THIS Free for All?
Ch. 1 LECTURE NOTES I. Learning objectives In this chapter students will learn: A. The definitions of economics and the features of the economic perspective. B. The role of economic theory in economics.
More informationChapter 2 The Economic Problem
Chapter 2 The Economic Problem 1) The production possibilities frontier represents A) the maximum amount of labor and capital available to society. B) combinations of goods and services among which consumers
More informationPrinciples of Macroeconomics, 11e - TB1 (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice
Principles of Macroeconomics, 11e - TB1 (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice 2.1 Scarcity, Choice, and Opportunity Cost 1) The process by which resources are transformed
More informationThe Production Possibilities Frontier and Social Choices
The Production Possibilities Frontier and Social Choices By: OpenStaxCollege Just as individuals cannot have everything they want and must instead make choices, society as a whole cannot have everything
More informationEconomics is the social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity.
Chapter 1: Limits, Alternatives, and Choices Learning objectives: List the ten key concepts to retain for a lifetime. Define economics and the features of the economic way of thinking. Describe the role
More informationProduction Possibilities, Opportunity Cost, and Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom questions are introduced as the fundamental economic questions that must be addressed
More informationFull file at Production Possibilities, Opportunity Cost, and Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom questions are introduced as the fundamental economic questions that must be addressed
More informationTHE ECONOMIC PROBLEM. The Big Picture
C h a p t e r 2 THE ECONOMIC PROBLEM The Big Picture Where we have been: Chapter 1 introduced the economic reality that wants exceed the resources available to satisfy them we face scarcity. Chapter 2
More informationPrinciples of Microeconomics, 11e -TB1 (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice
Principles of Microeconomics, 11e -TB1 (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice 2.1 Scarcity, Choice, and Opportunity Cost 1) The process by which resources are transformed
More informationProduction Possibilities, Opportunity Cost, and Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom are introduced as the fundamental economic questions that must be addressed by all societies.
More informationLearn the difference between microeconomics and macroeconomics. Understand scarcity and opportunity cost.
1 1.1 Goals of this class Goals of this class Learn what economics is. Learn the difference between microeconomics and macroeconomics. Understand scarcity and opportunity cost. Learn the different factors
More informationMultiple choice questions 1-60 ( 1.5 points each)
NAME: STUDENT ID: Final Exam ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your exam
More informationChapter 2: Scarcity, Choice and Economic Systems
Chapter 2: Scarcity, Choice and Economic Systems Opportunity Cost How do we decide about the cost of a good/service? Money? Economist: Money is a part of its cost Opportunity Cost: most accurate and complete
More informationChapter 1: What is Economics? Definition of Economics All economic questions arise because we want more than we can get Our inability to satisfy all
Chapter 1: What is Economics? Definition of Economics All economic questions arise because we want more than we can get Our inability to satisfy all our wants is called scarcity Because we face scarcity,
More information- Scarcity leads to tradeoffs - Normative statements=opinion - Positive statement=fact with evidence - An economic model is tested by comparing its
Macroeconomics Final Notes: CHAPTER 1: What is economics? We want more than we can get. Our inability to satisfy all of our wants is called scarcity. All resources are finite even if they are abundant.
More informationEcon 101, Final, Fall ANSWER KEY
Econ 101, Final, Fall 2008. ANSWER KEY Prof. Guse, W & L University 1. [ 3 Points ] The bowed-out shape of the Production Possibility Frontier (PPF): (a) reflects the existence of opportunity cost. (b)
More information6) Refer to Table 2-1. What is Finland's opportunity cost of producing one cell phone?
Principle of Macroeconomics, Chapter two Chapter three Summer B, 2017, FIU Chapter two 1) The principle of is that the economic cost of using a factor of production is the alternative use of that factor
More informationThe Foundations of Microeconomics
The Foundations of Microeconomics D I A N N A D A S I L V A - G L A S G O W D E P A R T M E N T O F E C O N O M I C S U N I V E R S I T Y O F G U Y A N A 1 4 S E P T E M B E R, 2 0 1 7 Wk 3 Lectures I
More informationEastern Mediterranean University Faculty of Business and Economics Department of Economics Fall Semester. ECON 101 Mid term Exam
Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2014 15 Fall Semester ECON 101 Mid term Exam Type A 28 November 2014 Duration: 90 minutes Name Surname: Group
More informationECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Micro Basics Towson University 1 / 51
ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 2-4 - Micro Basics Towson University 1 / 51 Disclaimer These lecture notes are customized for the Macroeconomics
More informationChapter 2 Lecture: Scarcity and the World of Trade-Offs
Chapter 2 Lecture: Scarcity and the World of Trade-Offs Production - any activity that results in the conversion of resources into products that can be used in consumption. The Factors of Production are
More informationPart I: Math Review Remember to show all of your work. Also remember that calculators are not permitted on exams, so you should try these by hand.
Economics 101 Fall 2013 Answers to Homework #1 Due Tuesday, September 17, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number
More informationFull file at https://fratstock.eu
CHAPTER 2 THE PRODUCTION POSSIBILITIES FRONTIER FRAMEWORK OF ANALYSIS Chapter 2 introduces the basics of the PPF, comparative advantage, and trade. This is not exactly a tools of economics chapter; instead
More informationEconomics for Business Decision Making
Week 1: Explain that: People are rational Consumers and firms use as much of the available information as they can to achieve their goals rational individuals weigh the benefits and costs of each action,
More informationChapter 2 Economic Activities: Producing and Trading
Chapter 2 Economic Activities: Producing and Trading 1. Points outside (or beyond) the PPF are a. attainable. b. unattainable. c. efficient. d. inefficient. 2. Which of the following statements is true?
More informationEssentials of Economics, 4e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System
Essentials of Economics, 4e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System 2.1 Production Possibilities Frontiers and Opportunity Costs 1) Scarcity A) stems from the
More information1. A decrease in unemployment causes the PPF to shift outward (to the right). ANSWER: False
1. A decrease in unemployment causes the PPF to shift outward (to the right). a. True b. False ANSWER: False 2. The law of increasing opportunity cost results from the varying ability of resources to adapt
More informationEconomics, 5e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System
Economics, 5e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System 2.1 Production Possibilities Frontiers and Opportunity Costs 1) Scarcity A) stems from the incompatibility
More informationECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69
ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 2-4 - Introduction Towson University 1 / 69 Disclaimer These lecture notes are customized for the Macroeconomics
More informationLECTURE NOTES. HCS 112 Fundamentals of economics INTRODUCTION. After completing this part, students should be able to:
INTRODUCTION After completing this part, students should be able to: 1. Define economics. 2. Describe the economic perspective (or economic way of thinking ), including definitions of scarcity, opportunity
More informationPRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N CASE FAIR OSTER. PEARSON Prepared by: Fernando Quijano w/shelly 1 of Tefft 32
PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N CASE FAIR OSTER PEARSON Prepared by: Fernando Quijano w/shelly 1 of Tefft 32 2 of 32 The Economic Problem: Scarcity and Choice 2 C H A P T E R
More informationChapter 2 Economic Activities: Producing and Trading
Chapter 2 Economic Activities: Producing and Trading MULTIPLE CHOICE 1. Points outside (or beyond) the PPF are a. attainable. b. unattainable. c. efficient. d. inefficient. 2. Which of the following statements
More informationUnit 2 Economic Models: Trade-offs and Trade
Unit 2 Economic Models: Trade-offs and Trade Objectives Why models simplified representations of reality play a crucial role in economics Two simple but important models: the production possibility frontier
More informationAfter studying this chapter you will be able to
3 Demand and Supply After studying this chapter you will be able to Describe a competitive market and think about a price as an opportunity cost Explain the influences on demand Explain the influences
More informationWeek 1 (Part 1) Introduction Econ 101
Week 1 (art 1) Introduction Econ 101 reliminary Concepts (Chapter 2 g 38-41 & 47-50) Economics is the study of how individuals and societies choose to use scarce resources that nature and previous generations
More informationEconomics 2017 (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System
Economics 2017 (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System 2.1 Production Possibilities Frontiers and Opportunity Costs 1) Scarcity A) stems from the incompatibility
More informationFull file at
CHAPTER 2 Economic Activities: Producing and Trading Chapter 2 introduces the basics of the PPF, comparative advantage, and trade. This is not exactly a tools of economics chapter; instead it explores
More informationEconomics is the study of how society manages and allocates its scarce resources. Scarcity refers to society s limited number of resources
Economics Notes 10 Lessons From Economics Chapter 1 What is Economics? Economics is the study of how society manages and allocates its scarce resources. Scarcity refers to society s limited number of resources
More informationEssentials of Economics 2017 (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System
Essentials of Economics 5th Edition Hubbard TEST BANK Full clear download (no error formating) at: https://testbankreal.com/download/essentials-of-economics-5th-editionhubbard-test-bank/ Essentials of
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 1
Economics 2 Spring 2018 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 1 1.a. Opportunity cost is defined as the value of what must be forgone to undertake an activity, where
More informationBasics of Economics. Alvin Lin. Principles of Microeconomics: August December The Economic Problem: How are production decisions made?
Basics of Economics Alvin Lin Principles of Microeconomics: August 216 - December 216 1 Model of an Economy 1.1 Production The Economic Problem: How are production decisions made? 1.1.1 Production Possibilities
More informationUse Bubble Sheet for Final Answers: Bubble Last Name, followed by First Name, and your ID number!!
S201 - Exam 1: Fall 07 Professor Walker I. Multiple Choice (3 points each) Use Bubble Sheet for Final Answers: Bubble Last Name, followed by First Name, and your ID number!! 1. The study of economics suggests
More informationTHE ECONOMIC PROBLEM. A n s w e r s t o t h e R e v i e w Q u i z z e s. Page 32
Microeconomics Canada in the Global Environment Canadian 8th Edition Parkin SOLUTIONS MANUAL Full clear download at: https://testbankreal.com/download/microeconomics-canada-globalenvironment-canadian-8th-edition-parkin-solutions-manual/
More informationChapter 2 The Economic Problem: Scarcity and Choice
Principles of Economics Twelfth Edition Chapter 2 The Economic Problem: Scarcity and Choice Copyright 2017 Pearson Education, Inc. 2-1 Copyright 2-2 Chapter Outline and Learning Objectives 2.1 Scarcity,
More informationProduction Possibilities, Opportunity Cost, Economic Growth
Chapter 2 Production Possibilities, Opportunity Cost, Economic Growth CHAPTER SUMMARY The "What," "How" and "For Whom" are introduced as the fundamental economic questions that must be addressed by all
More informationMacroeconomics, 4e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System
Macroeconomics, 4e (Hubbard/O'Brien) Chapter 2 Trade-offs, Comparative Advantage, and the Market System 2.1 Production Possibilities Frontiers and Opportunity Costs 1) Scarcity A) stems from the incompatibility
More informationEconomics 103 Microeconomic Principles Section(s) Betty Johnson
Page 1 UNIVERSITY OF VICTORIA Midterm 1 May 2016 Solutions NAME: STUDENT NUMBER: V00 Course Name & No. Economics 103 Microeconomic Principles Section(s) A01 CRN: 31252 Instructor: Betty Johnson Duration:
More informationEcon Basics. You should copy some information directly into your notebooks (Look for the Dollar Sign) LARGE = Grab as much (all) from the slide
Econ Basics You should copy some information directly into your notebooks (Look for the Dollar Sign) LARGE = Grab as much (all) from the slide small = bookend key phrases or ideas What is Economics? Economics
More informationSOLUTION MANUAL FOR ECON MACROECONOMICS 4 4TH EDITION MCEACHERN
SOLUTION MANUAL FOR ECON MACROECONOMICS 4 4TH EDITION MCEACHERN Link download full: http://testbankcollection.com/download/econ-macroeconomics-4-4thedition-mceachern-solutions COMPLETE DOWNLOADABLE FILE
More informationECON 2100 Principles of Microeconomics (Summer 2016) Scarcity, Opportunity Cost, and the Gains from Trade
EON 21 Principles of Microeconomics (Summer 216) Scarcity, Opportunity ost, and the Gains from Trade Relevant readings from the textbook: Mankiw, h. 3 Interdependence and the Gains from Trade Suggested
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapters 2-4: Additional Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The market system is also known as: A) Central planning B) Production
More informationYOUR NAME (please print) Form 1. Directions
Assigned Seat YOUR NAME (please print) Form 1 Directions 1. There are 49 multiple choice questions. All answers should be recorded on both your exam and the scantron. Be sure to fill in your unique id
More informationWEEK 4: Economics: Foundations and Models
WEEK 4: Economics: Foundations and Models Economics: study of the choices people and societies make to attain their unlimited wants, given their scarce resources Market: group of buyers and seels of good
More informationInternational Economics, 9e (Husted/Melvin) Chapter 2 Tools of Analysis for International Trade Models. 2.1 Multiple-Choice Questions
International Economics, 9e (Husted/Melvin) Chapter 2 Tools of Analysis for International Trade Models 2.1 Multiple-Choice Questions 1) analysis by economists refers to the attempt to answer questions
More informationInternational Economics, 8e (Husted/Melvin) Chapter 2 Tools of Analysis for International Trade Models. 2.1 Multiple-Choice Questions
International Economics, 8e (Husted/Melvin) Chapter 2 Tools of Analysis for International Trade Models 2.1 Multiple-Choice Questions 1) analysis by economists refers to the attempt to answer questions
More informationCHAPTER THREE DEMAND AND SUPPLY
CHAPTER THREE DEMAND AND SUPPLY This chapter presents a brief review of demand and supply analysis. The materials covered in this chapter provide the essential background for most of the managerial economic
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2
Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose
More informationThe Production Possibilities Frontier and Social Choices *
OpenStax-CNX module: m48607 1 The Production Possibilities Frontier and Social Choices * OpenStax This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution License 4.0 By
More informationL2 Demand. I. Demand Curve. 1. Individual Demand. Example: Helen s demand for lattes.
L2 Demand Example: Helen s demand for lattes. I. Demand Curve The demand curve shows the relationship between price and quantity demanded. o Quantity demanded means the amount of a good that buyers are
More information1 Explain and illustrate the concepts of scarcity, production efficiency, and tradeoff using the production possibilities frontier.
3 The Economic Problem When you have completed your study of this chapter, you will be able to CHAPTER CHECKLIST 1 Explain and illustrate the concepts of scarcity, production efficiency, and tradeoff using
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2
Economics 2 Spring 2018 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. In this problem we are dividing everything the household buys into two categories child care
More informationChapter 1 Limits, Alternatives, and Choices
Chapter Overview Chapter 1 Limits, Alternatives, and Choices This chapter begins with a discussion of the meaning and importance of economics. In this first chapter, however, we will not plunge into problems
More informationLecture 3. The Market Mechanism. The Market Mechanism. The Market Mechanism. The Market Mechanism. The Market Mechanism. The Market Mechanism
Lecture 3 Readings: Chapters 3 Between 1900 and 2000, productivity grew faster in agriculture than in any other sector of the economy. Over the same period, productivity has only grown very slowly in the
More information