The economic problem and opportunity cost

Question 1

What is a positive statement?

Answer 1

This is a statement that can be tested against facts, it doesn’t have to be true.

Question 2

Give an example of a positive statement.

Answer 2

A statement without an opinion or suggestion.

E.g a reduction in income tax will improve incentives of the unemployed to find work.

Question 3

What is a normative statement?

Answer 3

A statement that contains a value statement so it would be an opinion, it contains words like should fair, should, is right etc.

Question 4

Give an example of a normative statement.

Answer 4

A statement that includes an opinion.

E.g The government should decrease income tax to help unemployment rise

Question 5

What is a value judgement?

Answer 5

A statement based on your opinion or beliefs, rather than on facts.

Question 6

What is a firm?

Answer 6

An organisation that outputs a good or a service.

Question 7

What are economic goods?

Answer 7

Goods that are scarce.

Question 8

What are free goods?

Answer 8

Goods such as the Earth’s atmosphere that are not normal regarded as being scarce.

Question 9

What is poverty?

Answer 9

A situation where the individuals lack the basic necessities of life or have low incomes relative to their fellow citizens.

Question 10

What are the three economic agents?

Answer 10

Firms.
Government.
Consumers.

Question 11

What is an economic agent?

Answer 11

An economic who can recognise that different factors influence and motivate different economic groups.

Question 12

What is the consumers function as a economic agent?

Answer 12

A consumer is a person or organisation that uses or consumes goods and services.

Question 13

What is a firms function as a economic agent?

Answer 13

A for-profit organisation that provides commodities for consumers.

Question 14

What is a firm as a economic agent?

Answer 14

An organisation that provides rules for how firms and consumer

Question 15

What is the idea of scarcity?

Answer 15

The idea that resources are limited whereas needs and wants are unlimited.

Question 16

What is opportunity cost?

Answer 16

When making a decision opportunity cost is the issue with the next-best alternative being forgone.

Question 17

What is the production possibility curve(PPC)?

Answer 17

A curve showing the maximum combinations of goods and services that can be produced in a set period of time given the available resources.

Question 18

What are economic goods?

Answer 18

Goods that are scarce.

Question 19

What is a free good?

Answer 19

Goods that are not normally regarded as being scarce. E.g air.

Question 20

What are positive and normative statements function?

Answer 20

To create a difference between a objective idea and a subjective idea.

Question 21

Who are the three economic agents?

Answer 21

• firms
• government
• consumers

Question 22

How do the three economic agents link together?

Answer 22

The government regulates interactions between firms and consumers.

Question 23

What are a consumers objectives?

Answer 23

Consumers expect to receive utility from expending income to receive goods and services.

Question 24

What are a firms objectives?

Answer 24

To make profit from the sale of goods and services to the consumer.

Question 25

What is the governments objectives?

Answer 25

To raise finance through taxation to support a framework in which the economy can operate.