FINAL Econ test 1. ch 2

Thus the marginal benefit of a choice, for example, would be the "____ ____" one receives from making that choice. The marginal cost of the choice would be the "____ ____" one incurs from the choice

added benefit, added cost

The opportunity cost of an action is:

the value of the best opportunity that must be sacrificed in order to take the action.

What does a point inside the PPC curve mean?

Any time we don't use all our resources fully and efficiently we are producing at a point inside the curve. Points inside the curve indicate what we can produce if there is Recession or Wasteful use of resources.

What makes economic growth possible? (2)

Increase in resources Technological change

Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

The Batman T-shirt

All points on the production possibilities curve represent efficient levels of production, T/F

True

Every economic choice has an opportunity cost. T/F

True

Scarcity limits an economy to points to ONLY on or below its production possibilities curve. T/F

True

all decisions have costs, even the right ones? T/F

True

the three fundamental economic questions?

What to produce? How to produce? For whom to produce?

what does a production possibilities curve reveal? What do points on the PPC represent?

all the different combinations that can be produced given our resources and technology. points on the ppc represent combinations of the two products we are capable of producing

what do rational decision makers change when marginal costs or marginal benefits are changed? what tool is effective in changing someone's behavior?

behavior. incentives

what does opportunity costs apply to?

decisions individual people make about their scarce personal resources (their time, money, etc.) as well as to decisions society makes about its scarce economic resources (land, labor, capital, and entrepreneurship).

what is a crucial part of increasing the amount of available resources?

investment spending - the purchase of newly produced capital goods by firms

what are Factors Shifting the PPF-curve Up and to the Right referred to as? what are they?

long term economic growth. 1-technological improvements 2-increases in amount of available resources "accumulation of capital" 3-Increases in the health, skills, education, and experience of workers "increasing human capital"

what do economists emphasize one needs to use to make the rational or right decision

marginal analysis or marginal reasoning

what is the slope of the PPC? what does this inidcate. what do All points on the production possibilities curve represent? what does A point outside the production possibilities curve represent?

negative, scarcity. efficient levels of production. A combination of goods that is unattainable.

is it efficient to transfer workers from one production process to another? why or why not

no b/c there can be a loss in productivity due to not haveingthe experience or the skills for their new job

what is a good decision?

one for which the marginal benefit EXCEEDS the marginal cost.

if food is on the X axis of a PPC and clotes is on the Y, what is happening to the opportunity costs as more food is produced? WHAT DOES THIS MEAN??

opportunity costs (sacrifices) are getting larger and larger as we produce more and more food. Ex The 1st 100 tons of food production cost only 25 tons of clothing, a small sacrifice; on the other hand, the last 100 tons of food production cost 200 tons of foregone clothing production, a much larger sacrifice. -as we produce equal increments of food, we must give up more and more of the other good—clothing.

what is the various combinations of goods and services it is capable of producing at a certain moment referred to as?

production possibilities

Over time, an increase in a nation's stock of physical capital will do what to the PPC?

shift the production possibilities curve outward.

what is the most important contributor to U.S. economic growth.

technology-

what is opportunity cost?

the best alternative given up when that choice is made.

The production possibility curve is bowed outward from the origin because of:

the law of increasing opportunity costs.

what does marginal analysis come down to

the marginal benefit expected from a choice and the expected marginal cost of that choice.

what do Technological innovations do the the PPC?

the production possibilities curve to shift to the right.

In the context of the production possibilities curve (when a society decides to move from one point on a ppc to another point on a ppc), opportunity cost is measured in:

the quantity of other goods given up.