Unit 2: Closer Look At The Economic Problem Scarcity

Question 1

give another reason why the curve is sometimes called the ppf?

Answer 1

Because they can not move beyond the points on the curve

Question 2

True or false : point within the curve is attainable ?

Answer 2

True

Question 3

Why are points within the curve inefficient?

Answer 3

Either the available resources are not being used to their full potential or some are left idle

Question 4

What does a point inside the ppf show ?

Answer 4

The economy is operating at less than potential output

Question 5

How do you expand production at a point inside the ppf?

Answer 5

By simply using the existing resources fully and efficiently.

Question 6

On the ppf where are resources fully and efficiently utilised?

Answer 6

On the production possibility curve

Question 7

True or false : in the curve production output is equal to potential output

Answer 7

True

Question 8

Define potential efficiency?

Answer 8

more output of one good can be obtained by sacrificing output of other goods

Question 9

How can points beyond the ppf be obtained ?

Answer 9

By increasing quantity of available resources and/ or production techniques improved

Question 10

What happens to the ppf when points above it are obtained ?

Answer 10

It has an outward shift

Question 11

What does an outward shift on the ppf illustrate?

Answer 11

Economic growth

Question 12

What does an improved technique imply ?

Answer 12

That less resources are required to produce the same level of output

Question 13

When can both production output increase?

Answer 13

When the amount of available resources increase and / or productivity of available resources increases

Question 14

What does an inward shift on the ppf indicate ?

Answer 14

Decline in potential output. Amount of available resources or the productivity decrease

Question 15

How is the potential output chosen ?

Answer 15

The final choice will depend on the preference of society

Question 16

What are the 3 central economic questions?

Answer 16

1. What to produce ?
2. How to produce it ?
3. For whom ?

Question 17

What are the 3 central economic questions used for ?

Answer 17

Used to introduce a variety of concepts, distinctions , factors of productions and economic systems.

Question 18

What’s the purpose of economic activity

Answer 18

To satisfy human wants

Question 19

What satisfy our wants ?

Answer 19

Goods and services

Question 20

Difference between goods and services?

Answer 20

Goods are tangible objects eg: food etc
Services are intangible things eg: medical services

Question 21

What is the next step after deciding what to produce ?

Answer 21

How to produce it

Question 22

What are factors of production ?

Answer 22

Resources that are used to produce goods and services

Question 23

What are natural resources ?

Answer 23

Gifts of nature eg: sunshine , minerals , waters , animal life etc

Question 24

True or false : natural resources are in fixed supply

Answer 24

True but it is possible to exploit more of the available resources

Question 25

True or false : natural resources cannot be replaced

Answer 25

True

Question 26

What results do we see as natural resources cannot be replaced

Answer 26

Minerals are referred to as non-renewable or exhaustible assets As is the case with all the factors of production, both quality and the quantity of natural resources are important.

Question 27

What is labour ?

Answer 27

Exercise of human and physical efforts in production of goods and services

Question 28

What does the quantity available (labour ) depend on ?

Answer 28

It depends on the size and proportion of the population which are willing and able to work

Question 29

What is human capital ?

Answer 29

Refers to the skills , knowledge and health of the workers

Question 30

What is capital ?

Answer 30

Comprises of all manufactured resources (machinery, tools and buildings) which are used in the production of other goods and services

Question 31

Why are capital good not produced for their own sake ?

Answer 31

They are produced to produce other goods

Question 32

What is an entrepreneur?

Answer 32

Factors of production have to be combined and organized by people who see opportunities and are willing to take risks by producing goods in the expectation that they will be sold Entrepreneurs are the people who do this.

Question 33

Why do entrepreneurs do this ?

Answer 33

For a profit

Question 34

Name the fifth factor of production?

Answer 34

Technology

Question 35

What is meant by “ technology has been improved “ ?

Answer 35

New knowledge has been put into practice and more goods and services are produced with the given level of natural resources, labour , capital and entrepreneurship

Question 36

Invention vs innovation ?

Answer 36

Invention is the discovery of new technology .

Innovation is incorporating the new knowledge into actual production

Question 37

Why is money not a factor of production?

Answer 37

Money can not produce good and services

Question 38

What are goods and services produced by ?

Answer 38

Factors of production

Question 39

What is money ?

Answer 39

Medium of exchange

Question 40

What choice do we have to make when deciding how to produce goods and services ?

Answer 40

Choice of what is the best method of production will be

Question 41

True or false : production of often involves one technique

Answer 41

False

Question 42

What 4 factors are considered when choosing production techniques?

Answer 42

The availability of resources
The quality of resources available
The relative prices of the resource available
The labour laws of the country and other relevant laws

Question 43

Who are good and services produced for ?

Answer 43

Government and the rest of the economy

Question 44

Private vs public sector

Answer 44

Private : rest of the economy
Public : government

The private sector is the part of the economy not run by the government. It comprises the businesses and enterprises that are controlled by private individuals and groups for the purpose of making a profit. Companies and organizations run by the state are considered to be the public sector.