Chapter 1

Question 0

Opportunity cost

Answer 0

refers to good or service that consumers / producers give up in order to have what they desire most at the time
- the value of the second good forgone

Question 1

Economic Problem

Answer 1

• unlimited wants and needs
• finite resources
• scarcity
• need to make choices

Question 2

PPF

Answer 2

• production possibility frontier
• displays opportunity cost
• model
• has assumptions
• hypothetical situations only
• shows all combinations of goods and services produced
• not always straight due to increasing opportunity cost

Question 3

Economics

Answer 3

study of the use of scarce resources that have alternate uses

Question 4

Assumptions

Answer 4

• technology is fixed
• resources are fixed in quantity and quality
• only two goods can be produced

Question 5

Positive Economics

Answer 5

• The facts given
• no value judgement
• statistics
• testing and developing economic theories

Question 6

Normative Economics

Answer 6

• A value judgement is made
• what ought to be
• Involves an opinion

Question 7

Macro- economics

Answer 7

• Study of the whole economy

Question 8

Micro - Economics

Answer 8

Study of individual agents and markets

Question 9

Increasing Opportunity Cost

Answer 9

• Refers to the productivity of resources differing between types of good and services
• As resources are reallocated, some become less suited to make a particular good than others are, thus requiring more to produce a certain amount.