Unit 1

Question 1

Budget Constraint Function

Answer 1

B = (p1 x q1) + (p2 x q2)

Question 2

What is Economics

Answer 2

The study of how humans/businesses/countries make decisions based on scarcity of resources

Question 3

Scarcity

Answer 3

Human Demand > Resources

Question 4

Division of labor

Answer 4

Production is divided into a number of tasks performed by different workers

Question 5

Economies of Scale

Answer 5

As production increases, the average cost of producing each unit decreases

Question 6

Command Economy

Answer 6

Economy dictated by a ruler

Question 7

Market Economy

Answer 7

Resources are owned by private individuals and businesses supply goods/services based on demand

Question 8

Budget Funtion

Answer 8

B = P1 x Q1 + P2 x Q2

Question 9

Law of Diminishing Marginal Utility

Answer 9

As you consume more of a good the utility from each additional consumption decreases

Question 10

Opportunity Cost

Answer 10

Value of the forgone alternative

Question 11

Opportunity Set

Answer 11

All possible combinations of consumption

Question 12

Production Possibilities Curve PPF

Answer 12

Downward sloping convex to axis

Shows the productively efficient combinations of two products that a county can produce

Question 13

Production Possibilities Curve PPF

Answer 13

Downward sloping convex to axis

Shows the productively efficient combinations of two products that a conutry can produce

Question 14

Allocative Efficiency

Answer 14

The mix of goods represents what society most desires

Question 15

Productive Efficiency

Answer 15

It is impossible to produce more of a good without decreasing production of another good

• represents all choices on a PPF

Question 16

Comparative Advantage

Answer 16

When a country produces at a lower opportunity cost

Question 17

Comparative Advantage

Answer 17

When a country produces at a lower opportunity cost