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Questions and Answers
What is the fundamental economic problem of scarcity?
What is the opportunity cost of choosing one option over another?
What is the typical shape of a Production Possibility Curve (PPC)?
What is allocation of resources in economics?
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What is the result of division of labor?
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What characterizes a mixed economic system?
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What is the shape of the demand curve faced by a firm in a perfectly competitive market?
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What is total revenue equal to?
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What is the relationship between the marginal revenue curve and the demand curve in a perfectly competitive market?
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What are explicit costs?
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Study Notes
Scarcity and Opportunity Cost
- Scarcity is defined as limited resources and unlimited wants.
- Opportunity cost is the value of the next best alternative foregone.
Production Possibility Curve (PPC)
- The shape of the PPC is typically concave to the origin.
Resource Allocation
- Allocation of resources refers to the utilization of resources to produce goods and services.
Division of Labor
- Division of labor leads to increased efficiency.
Economic Systems
- A mixed economic system has both private and government-controlled resources.
Perfectly Competitive Market
- In a perfectly competitive market, the demand curve faced by a firm is perfectly elastic.
- The marginal revenue curve under perfect competition coincides with the demand curve and is horizontal at the market price.
- Total revenue is equal to price multiplied by quantity sold.
Cost Concepts
- Explicit costs include costs of raw materials, excluding opportunity costs.
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Description
Test your knowledge of economics concepts, including scarcity, opportunity cost, and production possibilities.
