Economics Lecture 2
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Questions and Answers

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?

    <p>Producing more of what people want and less of what people don't want</p> Signup and view all the answers

    What is the difference between microeconomics and macroeconomics?

    <p>Microeconomics studies individual economic units, while macroeconomics studies the economy as a whole</p> 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?

    <p>Allocative inefficiency</p> Signup and view all the answers

    What is the definition of productive efficiency?

    <p>Producing a combination of goods that lies on the production possibility frontier</p> Signup and view all the answers

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

    <p>Improvements in technology and an increase in the population size of the working population</p> Signup and view all the answers

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

    <p>The amount of A that could have been produced</p> Signup and view all the answers

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

    <p>Through international trade</p> Signup and view all the answers

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

    <p>A decrease in consumption goods production</p> Signup and view all the answers

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

    <p>A gain of 12 units of B</p> Signup and view all the answers

    What is the opportunity cost of a decision?

    <p>The value of the next best alternative given up</p> Signup and view all the answers

    Which of the following is a microeconomic issue?

    <p>The price of DVDs</p> Signup and view all the answers

    What is the primary difference between microeconomics and macroeconomics?

    <p>Microeconomics studies individual economic units, while macroeconomics studies the economy as a whole</p> Signup and view all the answers

    What is the Production Possibility Frontier (PPF)?

    <p>A graph that shows the various combinations of two goods that can be produced given the available resources and technology</p> Signup and view all the answers

    What is the implication of scarcity in economic decision making?

    <p>Choices must be made because wants are unlimited but resources are limited</p> Signup and view all the answers

    Why do all decisions involve opportunity costs?

    <p>Because all decisions require a sacrifice of the next best alternative</p> Signup and view all the answers

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