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Questions and Answers
What is one thing economists do to help them understand how the real world works?
What is one thing economists do to help them understand how the real world works?
make assumptions
When a production possibilities frontier is bowed outward, what happens to the opportunity cost of producing an additional unit of a good?
When a production possibilities frontier is bowed outward, what happens to the opportunity cost of producing an additional unit of a good?
increases as more of the good is produced
Why are production possibilities frontiers usually bowed outward?
Why are production possibilities frontiers usually bowed outward?
resources are specialized; that is, some are better at producing particular goods rather than other goods
What are the steps in the scientific method?
What are the steps in the scientific method?
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What does a circular flow diagram show?
What does a circular flow diagram show?
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What does PPF stand for and what does it show?
What does PPF stand for and what does it show?
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What does an efficient PPF signify?
What does an efficient PPF signify?
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What does an inefficient PPF indicate?
What does an inefficient PPF indicate?
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What is a feasible combination in terms of PPF?
What is a feasible combination in terms of PPF?
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What is a positive statement?
What is a positive statement?
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What is a nominative statement?
What is a nominative statement?
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Bow-shaped PPF: OC of one unit of good ___________ as more of good 1 is produced.
Bow-shaped PPF: OC of one unit of good ___________ as more of good 1 is produced.
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Study Notes
Economic Concepts
- Economists make assumptions to better understand real-world functioning.
- A production possibilities frontier (PPF) that is bowed outward indicates increasing opportunity costs for additional unit production.
- Resources are often specialized, explaining the bowed shape of the PPF; certain resources are more efficient for specific goods.
Scientific Approach
- The scientific method in economics involves observing phenomena, formulating theories, collecting and testing data, and revising theories based on findings.
Circular Flow Model
- The circular flow diagram illustrates the movement of dollars through markets, highlighting the interactions between households and firms.
Production Possibilities Frontiers
- The PPF illustrates the maximum output combinations an economy can produce given its resources and technology.
- An efficient PPF shows that all resources are being fully utilized and is represented along the arc of the frontier.
- An inefficient PPF indicates underuse of resources, depicted by points inside the arc.
- Feasible combinations of production can exist both on and inside the PPF.
Types of Economic Statements
- Positive statements attempt to describe the world as it is, focusing on factual claims.
- Normative statements express how the world should be, involving value judgments.
Opportunity Cost in PPF
- In a bow-shaped PPF, the opportunity cost of producing one more unit of a good increases as production of that good expands.
Studying That Suits You
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Description
Test your knowledge with flashcards from Economics Chapter 2. This quiz covers key concepts like production possibilities frontiers and opportunity costs, helping you to solidify your understanding of economic principles. Ideal for students looking to reinforce their learning.
