econ 11 - 2 the economic problem

Question 1

Why does scarcity exist?

Answer 1

Because resources are limited and not enough to satisfy ALL human wants.

Question 2

What problem does scarcity create?

Answer 2

allocation of scarce resources

Question 3

What are the four basic economic questions?

Answer 3

1) What to produce?
2) How much to produce?
3) How to produce?
4) For whom to produce?

Question 4

This economic tool/model illustrates the choices available to society and its constraints.

Answer 4

Production Possibilities Frontier (PPF) / Production Possibilities Curve (PPC)

Question 5

PPF demonstrates all the __________ __________ of the maximum amounts of two goods/services that can be produced with a __________ __________.

Answer 5

possible combinations ; given amount of resources

Question 6

Give six basic assumptions about the PPF.

Answer 6

1) The economy only produces two goods.
2) The resources/inputs used to produce the goods are fixed in supply.
3) All resources are used or employed.
4) Production technology is constant.
5) Resources can be easily used and transferred in the production of any of the goods.
6) There is a diminishing marginal productivity in the use of resources (technical assumption).

Question 7

Example: to produce more food, the economy needs to produce less clothing. The economy moves from option A to option F. What is this called?

Answer 7

Trade-off

Question 8

Differentiate a point on a curve vs a point inside a curve vs a point outside a curve.

Answer 8

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 answer will be put here soon

Question 9

What represents the value of the best forgone alternative?

Answer 9

opportunity cost

Question 10

What is the equation for opportunity cost? What does the denominator mean?

Answer 10

delta x / delta y

denominator is where you put the good that is increasing in production.

Question 11

The resulting value from the opportunity cost equation is also known as what?

Answer 11

trade-off rate