ECO216 - Chapter 2

Why is there scarcity?

Because our unlimited wants exceed our limited resources

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

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

Attending college is a case where the ________________ exceeds the monetary cost.

opportunity cost

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

the production possibilities frontier

The opportunity cost of an action:

Is a subjective valuation that can be determined only by the individual who chooses the action.

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

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.

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

Point G

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades from studying for an hour.