Economics And The Economic Problem, Opportunity Cost And Marginal Analysis, Production Possibilities Frontier

Question 1

Economics

Answer 1

• Study of how society allocates scarce resources based on unlimited wants of its people
• We want unlimitedly in a world of limited resources, so economics helps us determine which resources are used for our wants

Question 2

2 kinds of economics

Answer 2

Macroeconomics and microeconomics

Question 3

Macroeconomics

Answer 3

study of how the economy functions as a whole at a national level

Question 4

Microeconomics

Answer 4

study of individual households, groups, firms, markets

Question 5

Macroeconomics deals with

Answer 5

• total output & income
• total employment
• inflation

Question 6

Needs

Answer 6

what we need to survive; includes:
- food
- clothing
- shelter
- healthcare
- basic education

Question 7

Wants

Answer 7

desires satisfied by consuming goods or services

Question 8

Resources

Answer 8

anything used to produce goods and services

Question 9

Examples of resources include:

Answer 9

LLCE:
Land
Labor
Capital
Entrepreneurship

Question 10

Land

Answer 10

natural resources as gifts of nature

Question 11

Labor

Answer 11

human resources and effort that goes into goods and services

Question 12

Capital

Answer 12

capital resources that help produce other goods and services

Question 13

Entrepreneurship

Answer 13

ability to take risks and make new products/new uses of products

Question 14

Scarcity

Answer 14

occurs when there aren’t enough resources to meet demand; it is when society makes choices, as there aren’t enough resources to meet our wants

Question 15

Examples of scarce resources

Answer 15

gold, oil, natural gas, TIME

Question 16

Incentive

Answer 16

Any reward or benefit that encourages someone to do something; motivation

Question 16

Margin

Answer 16

concept used to describe the current level of consumption/production of a good/service

Question 17

Opportunity cost

Answer 17

Second-best option you’re passing up on; (You were my everything, I was your second best)

Question 17

When shopping, you realize you want an H&M shirt and a Bershka shirt. However, you’re not rich enough to buy both. If you choose the Bershka shirt, what is the opportunity cost?

Answer 17

H&M shirt; because losing the opportunity to get Bershka shirt would be the opportunity cost of H&M shirt

Question 18

Marginal Analysis

Answer 18

decision-making tool for comparing the marginal (additional) benefits of a course of action to the marginal (additional) costs

Question 19

If the marginal benefit is ___ than the marginal cost, it is worth doing

Answer 19

GREATER

Question 20

Marginal Cost

Answer 20

Increase in a producer’s total cost when it increases its output by one unit

Question 21

Marginal Benefit

Answer 21

Additional gain from consuming/producing one more unit of a good or service

Question 22

TINSTAAFL

Answer 22

“There is no such thing as a free lunch”

Question 23

What does the TINSTAAFL principle mean?

Answer 23

Even if you didn't pay for something, **someone did**, and there are costs as a result of that. (Nothing in life is free....)

Question 24

Our best decisions are made _____

Answer 24

at the margin

Question 25

____ helps us decide **how** we want to spend our resources

Answer 25

Marginal Analysis

Question 26

If the marginal cost is greater than the marginal benefit, _____

Answer 26

it **isn't** worth spending the resource

Question 27

Production Possibilities Frontier/Curve

Answer 27

shows the **different combinations** of 2 goods/services that can be provided in a given **time period** with a **fixed amount of resources**

Question 28

The PPF is a table that shows the

Answer 28

**full employment capacity of an economy** in the form of possible combinations of **2 goods** that could be produced within a given amount of **productive resources** and **level of technology**

Question 29

On the PPF, what do the points **on** the curve/line mean?

Answer 29

These points mean the economy is using its resources at the **most efficient level**

Question 30

On the PPF, what do the points **inside** the curve mean?

Answer 30

The economy is **underutilizing resources**/ not using resources efficiently

Question 31

On the PPF, what do the points **outside** the curve mean?

Answer 31

impossible!!! Reaching this point is **impossible** because we can never have enough resources to reach that point

Question 32

What does it mean for the economy if it moves towards the "impossible" point?

Answer 32

It shows there is economic growth, due to a **change in resources** and/or **advances in technology**