Questions and Answers
Which of the following combinations is part of Alex's budget constraint?
What is the opportunity cost of Irfan's second tutoring hour if he purchases 2 hours?
2 restaurant meals
The utility patterns illustrate the law of marginal diminishing utility because...
The increase in utility for each additional hour Martha exercises falls
Marginal analysis will help Martha in her decision making regarding how to spend her free time.
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If the country of OZ is currently producing 10 infrastructure projects and wants to produce 5 more, what is the opportunity cost?
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A budget constraint shows the limits on an individual's consumption, while a production possibility frontier shows the limits on an economy's production.
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The Production Possibility Frontier of Sandia illustrates the law of diminishing returns because...
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An economy will achieve productive efficiency when it ___ and will achieve productive efficiency when it ___.
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If the state of Texas has a lower opportunity cost for producing beef compared to Alaska, then...
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A normative statement reflects opinions or beliefs, while a positive statement...
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Study Notes
Budget Constraints and Opportunity Costs
- Alex's monthly budget for entertainment is $100, allowing for 2 movie tickets and 4 restaurant meals.
- Irfan's decision to purchase 2 hours of tutoring leads to an opportunity cost of 2 restaurant meals if he buys 1 tutoring hour first.
Diminishing Marginal Utility
- Martha experiences diminishing returns in utility, shown by a decreasing increase in satisfaction from additional hours of exercise.
Marginal Analysis
- Marginal analysis aids decision-making by evaluating the additional benefit against the incurred costs, implying that all aspects contribute to effective reasoning.
Production Possibility Frontier (PPF)
- The PPF for OZ represents trade-offs between infrastructure and technology; sacrificing 2 technology projects is necessary to increase infrastructure projects from 10 to 15.
- The concept of diminishing returns in Sandia indicates that the opportunity cost increases as more infrastructure is produced beyond an initial level.
Efficiency in Production
- An economy achieves productive efficiency by maximizing output and ensuring no simultaneous increase in the production of both goods.
- Optimal production specialization yields a combination of goods that maximize societal benefit.
Comparative Advantage
- Texas has a comparative advantage in beef production due to lower opportunity costs compared to Alaska, suggesting beneficial trade dynamics.
Normative vs. Positive Statements
- Normative statements express subjective opinions or beliefs, while positive statements are fact-based and objective.
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Description
This quiz features flashcards based on Chapter 2 of economics, focusing on budget constraints and decision-making scenarios. Each card presents a question related to budgeting and spending choices, helping reinforce your understanding of the concept.
