Chapter 2

Figure 2-1 Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C to F

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines.

marginal utility

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

normative statement

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier

Scarcity exists because of:

unlimited wants and limited resources.

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

utility

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

diminishing marginal utility

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Possibility A Economics History I 94 76 II 87 84 III 77 91 Table 2-1 Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam.

Figure 2-1 Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

All points on the production possibilities frontier are equally efficient.

Figure 2-1 Refer to Figure 2-1. The most inefficient point depicted is:

Point G

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

either the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve or the production possibilities frontier shifts outward due to an improvement in technology, but not as a result of the economy moving along the production possibilities in the direction of a greater quantity of defense.