Choice in a World of Scarcity - Chapter 2

Consider two points on the PPF: point A, at which there are 50 oranges and 100 apricots, and point B, at which there are 51 oranges and 98 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is

1 orange.

Productive inefficacy implies that

It's possible to obtain gains in one area without losses in the other

Productive efficiency tell us that if we are using all of our resources

it is impossible to produce more of one good without decreasing the quantity of another good.

An increase in the quantity of resources available

shifts the PPF outward.

The lower the opportunity cost of attending college

the more likely an individual will go to college.

Opportunity cost is the value of

the next best alternative.

Using Figure 2.2 from the text, How much is Alfonso spending on just Bus Tickets if he is at point C?

$4.00.

The higher the opportunity cost of doing something, the more likely it will be done.

False

How are changes in opportunity cost predicted to affect behavior?

The higher the opportunity cost of doing X, the less likely X will be done. The lower the opportunity cost of doing X, the more likely X will be done.

When one country can produce a good or service at a lower opportunity cost,

it has a comparative advantage in the production of that good.

If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is

a downward-sloping curve that is bowed outward.

The law of diminishing returns holds that

as you add more resources to a production process, the gains from those additional resources will diminish.

Something that provides disutility is called a

bad.

Marginal analysis in economics is also known as

change analysis.

International trade can benefit both countries if

each country produces what they have a comparative advantage in and exchange.