Questions and Answers
What is opportunity cost best defined as?
The term opportunity cost refers to the:
What would an economist say about your 'gain' on a used car purchase?
Both you and the seller have gained something.
If trade between two countries is voluntary, one can expect that:
Signup and view all the answers
The dramatic increase in the standard of living since the Industrial Revolution has meant unlimited abundance for societies.
Signup and view all the answers
Why is economics considered a social science rather than a 'hard' science?
Signup and view all the answers
What is abstraction in economics?
Signup and view all the answers
A useful economic model may make realistic assumptions in order to simplify complex reality.
Signup and view all the answers
If a curve has a slope equal to zero at some point A, what may occur to the right of A?
Signup and view all the answers
A line that rises at a 45-degree angle has a slope of:
Signup and view all the answers
How may an 'opportunity cost' be described?
Signup and view all the answers
Which of the following is an example of a fiscal policy initiative?
Signup and view all the answers
What is the opportunity cost to you of an action?
Signup and view all the answers
What is the opportunity cost of any good or service?
Signup and view all the answers
What does the principle of comparative advantage explain?
Signup and view all the answers
In the scenario where Tammy is a country singer and Bob can plow, who should specialize in which task?
Signup and view all the answers
Why might both the United States and Mexico benefit from trade in automobiles and computers?
Signup and view all the answers
What does the law of comparative advantage explain?
Signup and view all the answers
Study Notes
Opportunity Cost
- Opportunity cost is the value of what must be given up to acquire an item.
- It represents what is forgone when making a choice.
- Example: If you buy a car, the opportunity cost is what you could have purchased instead.
Gains from Trade
- In voluntary trade between countries, both sides expect to gain something.
- Mutual benefits can arise even when one country is more productive in all goods.
Economic Growth
- The rise in living standards since the Industrial Revolution has not resulted in unlimited abundance for individuals or societies.
Economics as a Social Science
- Economics is classified as a social science due to its focus on human behavior, influenced by numerous unpredictable factors.
Abstraction in Economics
- Abstraction involves omitting unnecessary details to better understand complex situations in economics.
Economic Models
- Useful economic models might make unrealistic assumptions to simplify complex realities for better analysis.
Slope and Curves
- A curve with a zero slope at point A may have various behaviors to the right of A.
- A line rising at a 45-degree angle has a slope of 1, indicating a proportional relationship.
Fiscal Policy
- An example of fiscal policy is a reduction in taxes, illustrating government actions to influence the economy.
Next Best Alternative
- The opportunity cost of an action is the value of the next best alternative that could have been taken.
Comparative Advantage
- The principle of comparative advantage explains that nations can trade beneficially even when one is more productive overall.
- Specialization based on comparative advantage leads to more efficient outcomes; for example, Tammy should specialize in singing due to her exceptional talent, while Bob should plow.
Benefits of Trade
- The law of comparative advantage allows for beneficial trade between nations, regardless of their levels of productivity or economic development.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz focuses on the key concepts from Chapter 1 of ECO210, including definitions and explanations of opportunity cost. It's designed to help you grasp the fundamentals of economic decision-making and the trade-offs involved. Test your understanding of these essential economic principles.
