Mod 1 Flashcards
What is the definition of economics?
Economics is a theory of choice and its unintended consequences.
Economics is the study of human behavior and how scarce resources are efficiently allocated.
Why do we all face tradeoffs?
Tradeoffs occur due to unlimited desires and limited resources.
What is a production possibility frontier?
A production possibilities frontier is a line showing the tradeoffs a society must make using all its productive resources and technology.
What does it mean if a point is on the production possibility frontier?
It shows a combination of goods that can be produced at the same time using all resources efficiently.
What does it mean if a point is inside the production possibility frontier?
It represents a combination of goods that doesn’t require all resources, indicating some resources are wasted.
What does it mean if a point is outside the production possibility frontier?
It shows a combination of goods that exceeds the economy’s productive capabilities due to limited resources.
What are opportunity costs?
Opportunity cost measures the value of the next best alternative given for chosen actions.
How does specialization increase the wealth of society?
Specialization allows individuals to become highly skilled at a specific task, benefiting society by producing valuable goods and services.
How does innovation increase the wealth of society?
Innovation expands the production possibilities frontier by finding improved ways to provide goods and services.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individuals and businesses; macroeconomics focuses on entire economies and issues like unemployment and inflation.
Fill in the blank: The opportunity cost of reading this chapter is measured by the best use of your time that you used to read the chapter, which is the value of the next best _______.
alternative.
True or False: The production possibilities frontier can shift inward.
False.
What happens to the production possibilities frontier if innovations in production occur?
The production possibilities frontier shifts outward.
