Economics Lecture 2

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What is the main reason why scarcity leads to a need for choices to be made in an economy?

Because wants and needs are limited
Because resources are unlimited, but wants and needs are scarce
Because wants and needs are unlimited, but resources are scarce (correct)
Because resources are abundant

What does the production possibility frontier (PPF) show?

The minimum output that can be produced in an economy
The average output that can be produced in an economy
The maximum output that can be produced in an economy (correct)
The total output that can be produced in an economy

What is the opportunity cost of attending university?

The number of hours you spend studying
The number of years you spend at university
The salary you could have earned if you didn't attend university (correct)
The cost of tuition fees

What is allocative efficiency?

Producing more of what people want and less of what people don't want (B) Signup and view all the answers

What is the difference between microeconomics and macroeconomics?

Microeconomics studies individual economic units, while macroeconomics studies the economy as a whole (A) Signup and view all the answers

What is the term for using our limited resources to produce TOO MUCH or TOO LITTLE of a particular good or service?

Allocative inefficiency (C) Signup and view all the answers

What is the definition of productive efficiency?

Producing a combination of goods that lies on the production possibility frontier (B) Signup and view all the answers

What can cause an outward shift of the production possibility frontier?

Improvements in technology and an increase in the population size of the working population (A) Signup and view all the answers

What is the opportunity cost of five more units of B in an economy at point C?

The amount of A that could have been produced (B) Signup and view all the answers

Why is it possible to consume outside the production possibility frontier?

Through international trade (C) Signup and view all the answers

What is the consequence of shifting resources from consumption goods to capital goods in the short run?

A decrease in consumption goods production (A) Signup and view all the answers

What is the result of trading two units of A abroad for 12 units of B?

A gain of 12 units of B (C) Signup and view all the answers

What is the opportunity cost of a decision?

The value of the next best alternative given up (A) Signup and view all the answers

Which of the following is a microeconomic issue?

The price of DVDs (A) Signup and view all the answers

What is the primary difference between microeconomics and macroeconomics?

Microeconomics studies individual economic units, while macroeconomics studies the economy as a whole (A) Signup and view all the answers

What is the Production Possibility Frontier (PPF)?

A graph that shows the various combinations of two goods that can be produced given the available resources and technology (D) Signup and view all the answers

What is the implication of scarcity in economic decision making?

Choices must be made because wants are unlimited but resources are limited (C) Signup and view all the answers

Why do all decisions involve opportunity costs?

Because all decisions require a sacrifice of the next best alternative (B) Signup and view all the answers