Econ Module 3

three important aspects of the economy

Efficiency Opportunity Cost Economic Growth

economic growth on a graph is pictured by

a larger line/point outside of the initial slope

efficient

an economy is efficient if there is no way to make anyone better off without making at least one person worst off

economic growth means

an expansion of the economy's production possibilities

1. Which point(s) on the graph represent productive efficiency? a. B and C b. A and D c. A, B, C, and D d. A, B, C, D, and E e. A, B, C, D, E, and F

c. A, B, C, and D

allocative efficiency

if it produces at the point along its ppc that makes consumers as well off as possible (catering to consumer want/need)

technology

the technical means for producing goods and services

how could an economy become smaller?

war or natural disasters

production possibilities curve

a model that helps economists think about the trade-offs every economy faces illustrates the trade-offs facing an economy that only produces two goods it shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced

5. This ppc shows the trade-off between consumer goods and capital goods. Since capital goods are a resource, an increase in the production of capital goods today will increase the economy's production possibilities in the future. Therefore, all other things equal, producing at which point today will result in the largest outward shift of the ppc in the future? a. A b. B c. C d. D e. E

a. A

if an economy's ppc shifts inward

the economy has become smaller

trade-off

when you give up something in order to have something else

1. True false? a. An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his ppc b. A technological change that allows Tom to catch more fish relative to any amount of coconuts gathered results in a change in his ppc c. Points inside a ppc are efficient and points outside a ppc are inefficient

a. False b. True c. False; points *inside* a ppc are feasible, but not necessarily efficient

productive efficiency

an economy achieves this if it produces at a point on its production possibilities curve

constant slope equals

constant opportunity cost

3. An increase in unemployment could be represented by a movement from point a. D to point C b. B to point A c. C to point F d. B to point E e. E to point B

d. B to point E

curved slope equals

disproportionate or increasing opportunity cost

4. Which of the following might allow this economy to move from point B to point F a. more workers b. discovery of new resources c. building new factories d. technological advances e. all of the above

e. all of the above

2. For this economy, an increase in the quantity of capital goods produced without a corresponding decrease in the quantity of consumer goods produced a. cannot happen because there is always an opportunity cost b. is represented by a movement from point E to point A c. is represented by a movement from point C to point B d. is represented by a movement from point E to point B e. is only possible with an increase in resources or technology

e. is only possible with an increase in resources or technology