chap 1

Question 1

economic scarity

Answer 1

all products and resources are limited, therefore scarce

Question 2

factors of production

Answer 2

1. land
2. labor
3. capital
4. entrepreneurship

Question 3

is money a capital good?

Answer 3

no, it is a “medium of exchange”

Question 4

3 economic questions

Answer 4

1. what to produce?
2. how to produce?
3. to whom will we sell it?

Question 5

opportunity costs

Answer 5

• each time you make a decision, you give up the chance to do something else
• the most desirable sacrifice is your opportunity cost

Question 6

explicit costs

Answer 6

a dollar value for your opportunity cost

Question 7

implicit costs

Answer 7

it is difficult to place a dollar value on your opportunity cost (“no receipt”)

Question 8

production possibility curve

Answer 8

• equal to the slop on a graph
• also called a “frontier”
• shows possible combinations of 2 variables that can be produced