Chapter 1 Midterm

Question 1

What is PPB

Answer 1

Production possibilities boundary: illustrates Scarcity, choice, and opportunity cost

Question 2

how is scarcity illustrated

Answer 2

through unattainable combinations outside the boundary

Question 3

how is choice illustrated

Answer 3

need to choose among the alternative attainable points ALONG the boundary.

Question 4

how is opportunity cost illustrated

Answer 4

Through the negative slop of the boundary

Question 5

A​ straight-line production possibilities boundary​ (PPB) indicates that the opportunity cost of each good is ____?

Answer 5

Constant

Question 6

A concaved PPB indicates an ______ amount of a good must be given up to produce more of the other good

Answer 6

increasing

Question 7

Imagine a hypothetical world in which all Canadian families had ​$80k of​ after-tax income:

In such a​ world, would poverty exist in​ Canada?

n such a​ world, would scarcity exist in​ Canada/

Answer 7

a) yes

b) no

Question 8

Opporitunity cost formula?

Answer 8

max amount of good 1 (opposite good) / max amount of good 2

EX: 240k budget, 50 atvs, 20 snowmobiles, find opp cost of snowmobiles: 50/20=2.5

Question 9

True or false : The opportunity cost of one ATV does not
depend on how many you purchase because the opportunity cost of one good stays constant for a​ straight-line boundary

Answer 9

trueeeeee

Question 10

if a point is less than the line the economy is?

if a point is along/touching the line the economy is?

Answer 10

inefficient

efficient

Question 11

When more productive resources become available in an​ economy, the production possibilities boundary will

Answer 11

shift outward

Question 12

What are the main characteristics of a market economy (4)

Answer 12

​SELF-INTEREST
Individuals pursue their own​ self-interest, buying and selling what seems best for them and their families.
INCENTIVES
People respond to incentives. Sellers usually want to sell more when prices are​ high; buyers usually want to buy more when prices are low.
MARKET PRICES AND QUANTITIES
Prices and quantities are determined in free markets in which​ would-be sellers compete to sell their products to​ would-be buyers.
INSTITUTIONS
All these activities are governed by a set of institutions largely created by government. The most important are private​ property, freedom of​ contract, and the rule of law. The natures of private property and contractual obligations are defined by laws passed by legislatures and enforced by the police and the courts.