econ ch-2
Which of the following is not a factor of production
money.
The concept of_________ is difficult to define objectively for every person. Consequently, we simply consider every person's wants to be unlimited. In a world of scarcity, satisfaction of one want necessarily means nonsatisfaction of one or more other wants.
need
Another way to look at opportunity cost is the trade-off that occurs when one activity is undertaken rather than the_____ alternative activity.
next-best
Scarcity requires us to choose. Whenever we choose, we lose the _______-valued alternative.
next-highest
Cost is always a forgone
opportunity
Points _____ the production possibilities curve are unattainable. Points _____ are attainable but represent an inefficient use or underuse of available resources.
outside; inside
Because many resources are better suited for certain productive tasks than for others, the production possibilities curve is bowed _____ , reflecting the law of increasing additional cost.
outward
physical capital
the human-made objects used to create other goods and services
Scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Which of the following statements about production possibilities curves is not true? A. A linear production possibilities curve illustrates the concept of efficiency. B. A linear production possibility curve illustrates the concept of increasing opportunity costs. C. A production possibilities curve illustrates the concept of scarcity. D. A production possibilities curve illustrates the concept of opportunity cost.
B. A linear production possibility curve illustrates the concept of increasing opportunity costs.
All of the following are assumptions underlying the production possibilities curve except A. production takes place over a specific time period. B. technology is assumed to be continuously improving. C. resources are fully employed. D. the resource inputs are fixed over the time period.
B. technology is assumed to be continuously improving.
Scarcity is the same as a shortage.
False
Which of the following would least likely be, for the typical student, the opportunity cost of attending a class at 11:00 a.m.?
Partying with a close circle of friends.
Law of increasing relative cost
The fact that the opportunity cost of additional units of a good generally increases as society attempts to produce more of that good. This accounts for the bowed-out shape of the production possibilities curve.
If you receive a free ticket to a concert, what, if anything, is your opportunity cost of attending the concert?
The next best activity that can't be done while attending the concert.
explicit costs
The opportunity cost of any activity is the highest-valued alternative that must be given up to engage in that activity. Costs are either explicit or implicit. When an entity spends money, an explicit cost results. If an entity incurs an opportunity cost but does not spend money, an implicit cost results.
Why do economists avoid making the distinction between wants and needs?
The term need is subjective making it difficult to distinguish between something someone wants and something they need.
opportunity cost
The highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want.
Engaging in any activity using any resource, even time, involves trading off the use of that resource for one or more alternative uses.
True
Every choice involves giving up an opportunity to produce or consume something else.
True
With respect to your grades in your acounting and economics classes, a one-to-one trade-off means that the opportunity cost of receiving one grade higher in accounting (for example, improving from a D to a C) is one grade lower in economics (falling from a B to a C).
True
a) Recently, a woman named Mary Krawiec attended an auction in Troy, New York. At the auction, a bank was seeking to sell a foreclosed property: a large Victorian house suffering from years of neglect in a neighborhood in which many properties had been on the market for years yet remained unsold. Her $10 offer was the highest bid in the auction, and she handed over a $10 bill for a title to ownership. Once she acquired the house, however, she became responsible for all taxes on the property amounting to $3,500 and for an overdue water bill of $2,000. In addition, to make the house habitable, she and her husband devoted months of time and unpaid labor to renovating the property. In the process, they incurred explicit expenses totaling $65,343. b) Mary Krawiec's total cost is___________ her explicit cost.. c) If the bank were to own the property, its total costs were likely to be ________ Mary Krawiec's explicit cost. d) The bank was willing to sell the house at auction to Ms. Krawiec for only $10 because if the bank paid to renovate the property, paid the back taxes, and paid the overdue water bill,
a) Mary Krawiec's explicit costs are equal to her Explicit expenses+ Property taxes+ Water bill =65,343+3,500+2,000+10=70,853 dollars. b) Higher than. c) Higher than. d) the expected selling price for the property would have been lower than the bank's total costs.
A production possibilities curve represents
all possible combinations of output that could be produced assuming fixed productive resources and their efficient use.
Julie goes to a cooking academy to become a chef. This is an example of
an investment in human capital.
For a nation that only produces two goods, the maximum amounts of each of those goods that can be produced are represented by points on a production possibilities curve that are half-way between the vertical and horizontal axes.
false
On a graph that shows the trade-off between the production of two goods, the trade-offs occur outside the production possibilities curve.
false
Many state governments claim a shortage of funds because there are "unmet needs." This claim is
false because of scarcity.
A production possibilities curve is drawn with the quantity and quality of all resources ______over the time period under study.
fixed
Economic goods are
goods that are scarce
outward shift
implies a greater productive capacity.
During the time period assumed by a production possibilities curve, it is ________ to be at a point outside the curve and ________ to be at a point beneath the curve.
impossible; possible
If miserable weather on the night of the concert requires you to leave much earlier for the concert hall and greatly extends the time it takes to get home afterward, the opportunity cost of attending the concert
increases
The shape of this outward bowed PPC is due to
increasing opportunity costs
You and a friend decide to spend $100 each on concert tickets. Each of you alternatively could have spent the $100 to purchase a textbook, a meal at a highly rated local restaurant, or several internet movie downloads. As you are on the way to the concert, your friend tells you that if she had not bought the concert ticket, she would have opted for a restaurant meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are
internet movie downloads for you and a meal at a highly rated local restaurant for your friend.
The factor of production that consists of factories and equipment used in production, as well as improvements to natural resources, is called
physical capital
A production possibilities curve that is bowed outward (from the origin) represents the concept that
production of additional units of one good requires that increasing quantities of the other good be given up.
a ______curve graphically shows the trade-off that occurs when more of one output is obtained at the sacrifice of another. This curve is a graphical representation of, among other things, opportunity cost.
production possibilities
Trade-offs are represented graphically by a ______curve showing the maximum quantity of one good or service that can be produced, given a specific quantity of another, from a given set of resources over a specified period of time-for example, one year.
production possibilities
Any activity that results in the conversion of resources into products that can be used in consumption is called
production.
Each individual must make choices because
resources are limited and therefore cannot satisfy one's many competing wants.
A point inside the PPC means that
resources are not being fully utilized due to unemployment or inefficiency.
__________is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available.
scarcity
_________is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available.
scarcity
A production possibilities curve
shows the possibilities available for increasing the output of one good or service by reducing the amount of another. defines the maximum quantity of one good or service that can be produced, given that a specific quantity of another is produced. represents all possible combinations of maximum outputs that could be produced, assuming a fixed amount of productive resources of a given quality.
The existence of scarcity requires
that people must make choices and face trade-offs in using their resources.
The opportunity cost of attending a class at 11:00 a.m. will likely differ from the opportunity cost of attending a class at 8:00 a.m. because
the number and variety of alternatives at 11 a.m. are likely to differ from those available at 8 a.m. a student's evaluation of any given set of alternatives is likely to be time-sensitive.
human capital
the skills and knowledge gained by a worker through education and experience
When an individual proclaims the need for a new car, the person typically means
they want something they currently do not have.
An economy is productively efficient whenever it is producing the maximum output with given technology and resources.
true
Economic goods are goods for which the quantity demanded exceeds the quantity supplied at a zero price.
true
Entrepreneurship is the component of human resources that performs the functions of organizing, managing, and assembling the other factors of production to create and operate business ventures.
true
The law of increasing additional cost shows that the opportunity cost of additional units of a good generally increases as people attempt to produce more units of that good.
true
_______are unlimited. They include all material desires and all nonmaterial desires, such as love, affection, power, and prestige.
wants
After the concert is over and you and your friend are traveling home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to study, to watch a sporting event on TV, or to get some extra sleep. Your friend decides that if she had not spent four hours attending the concert, she would have chosen to study, and you reply that you otherwise would have watched the televised sporting event. The relevant opportunity costs for you and your friend for allocating four hours to attending the concert are
watching a sporting event on TV for you and studying for your friend.
An economy's production is efficient
whenever it is operating on its production possibilities curve.
Does the richest person in the world face the problem of scarcity?
Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices.
The law of increasing additional cost is represented by a ________ production possibilities curve.
bowed-out
Factors of production include
land, labor, physical capital, human capital and entrepreneurship.
We use scarce resources, such as__________, __________, __________ and __________ capital, and __________, to produce economic goods—goods that are desired but are not directly obtainable from nature to the extent demanded or desired at a zero price.
land; labor; physical; human; entrepreneurship
People have ________ wants and ________ resources to deal with those wants.
unlimited; limited
