Microeconomics Chapter 1
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Questions and Answers

What is the origin of the word 'economy'?

  • A Greek word for 'business'
  • A Greek word for 'one who manages a household' (correct)
  • A French word for 'finance'
  • A Latin word for 'money'

    • What is the main focus of microeconomics?

  • The study of international trade
  • The study of individual parts of the economy (correct)
  • The study of the economic system as a whole
  • The study of government policies

    • What is a characteristic of land as a factor of production?

  • Its value is dependent on the efficiency of labour
  • Its supply is unlimited
  • It is mobile
  • Its supply is fixed in terms of location and geography (correct)

    • What is the return of land?

    <p>Rent</p> Signup and view all the answers

    What is a characteristic of labour as a factor of production?

    <p>It is mobile</p> Signup and view all the answers

    What is the return of labour?

    <p>Wage</p> Signup and view all the answers

    What is capital in the context of economics?

    <p>Assets such as money, equipment, and machinery used in production</p> Signup and view all the answers

    What is the main difference between microeconomics and macroeconomics?

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

    What is the main problem that leads to choice?

    <p>Scarcity of resources</p> Signup and view all the answers

    What is the goal of a consumer when making a choice?

    <p>To maximize their satisfaction</p> Signup and view all the answers

    What is an opportunity cost?

    <p>The second best product or service given up</p> Signup and view all the answers

    Why do decisions require comparing costs and benefits of alternatives?

    <p>Because of scarcity of resources</p> Signup and view all the answers

    What is the Production Possibilities Curve (PPC) used to explain?

    <p>Scarcity, choices, and opportunity cost</p> Signup and view all the answers

    What is the definition of the Production Possibilities Curve (PPC)?

    <p>A graph showing the various possible combinations of goods and services produced</p> Signup and view all the answers

    What is one of the assumptions of the Production Possibilities Curve (PPC)?

    <p>There are only two goods</p> Signup and view all the answers

    What is the question 'For Whom to Produce?' referring to in the basic economic problems?

    <p>The distribution of income</p> Signup and view all the answers

    Which of the following is a characteristic of a free good?

    <p>It is unlimited in supply.</p> Signup and view all the answers

    What is the return for an entrepreneur?

    <p>Profit</p> Signup and view all the answers

    Which type of good is owned by the government and funded by taxes?

    <p>Public good</p> Signup and view all the answers

    What is the primary reason for scarcity?

    <p>Limited resources</p> Signup and view all the answers

    Which of the following is NOT a characteristic of economic goods?

    <p>They are essential to human life.</p> Signup and view all the answers

    What is the concept that describes the value of the best alternative forgone when making a choice?

    <p>Opportunity cost</p> Signup and view all the answers

    Which of the following is an example of a capital good?

    <p>A factory</p> Signup and view all the answers

    What is the term for the ability to increase and decrease the quantity of capital used in production?

    <p>Mobility</p> Signup and view all the answers

    What does a point inside the PPC indicate?

    <p>That the production has not reached its maximum capacity and there is wastage of resources</p> Signup and view all the answers

    What does a point outside the PPC represent?

    <p>That the country is unable to meet production due to limited resources and technology</p> Signup and view all the answers

    What happens to the PPC when a country enjoys economic growth?

    <p>The PPC shifts outward</p> Signup and view all the answers

    What is the effect of natural disasters on the PPC?

    <p>The PPC shifts to the left</p> Signup and view all the answers

    How does an improvement in technology affect the PPC?

    <p>It increases the production of goods</p> Signup and view all the answers

    What does the PPC represent?

    <p>The maximum combination of goods that can be produced</p> Signup and view all the answers

    What happens to the PPC when there are improvements in technology?

    <p>The PPC shifts outward</p> Signup and view all the answers

    What is the main difference between points inside and outside the PPC?

    <p>Points inside PPC show wastage of resources, while points outside PPC show scarcity</p> Signup and view all the answers

    What is meant by full employment in an economy?

    <p>All available resources are utilized.</p> Signup and view all the answers

    What does the Production Possibility Curve (PPC) illustrate?

    <p>The maximum production output of goods.</p> Signup and view all the answers

    At Point A of the PPC, what is produced if all resources are allocated to sewing machines?

    <p>14 sewing machines.</p> Signup and view all the answers

    What is true about the resources available in the context provided?

    <p>They are fixed and finite.</p> Signup and view all the answers

    What indicates the best possible combinations of resources on the PPC?

    <p>Points lying on the curve.</p> Signup and view all the answers

    If all resources are allocated to produce butter, which point is achieved?

    <p>Point F.</p> Signup and view all the answers

    What happens to production if technology changes during the process?

    <p>The PPC shifts outward.</p> Signup and view all the answers

    What do Points A to F on the PPC represent?

    <p>Best combinations of resource use.</p> Signup and view all the answers

    Study Notes

    Introduction to Microeconomics

    • This chapter introduces economics, including several key concepts and terms such as scarcity, choice, and opportunity cost.
    • Economics is the study of how people use their limited resources to try to fulfill unlimited wants and involves alternatives or choices.
    • The field of economics is divided into microeconomics and macroeconomics.

    Microeconomics vs Macroeconomics

    • Microeconomics is the study of individual parts of the economy, such as public choices, business choices, and personal choices.
    • Macroeconomics is the study of the economic system as a whole, including national income, trade cycle, unemployment rate, inflation, and general price level.

    Economics Resources and Factors

    • There are four main factors of production: land, labor, capital, and entrepreneur.
    • Land is a naturally occurring resource with a fixed supply.
    • Labor is skilled and unskilled and contributes physically and mentally to production.
    • Capital includes assets such as money, equipment, machinery, and raw materials used in production.
    • Entrepreneur is the person with the ability and skill to organize production and bear risks.

    Types of Goods

    • Economic goods have limited supply and involve price and opportunity cost.
    • Free goods are unlimited in supply and can be obtained without cost, such as air and water.
    • Public goods are owned by the government and paid for by taxpayers' money, such as public roads and powerhouses.
    • Private goods are owned by individuals or companies and can be used by others if they pay or are allowed by the owner.

    Basic Economic Concepts

    • Scarcity refers to the limited products and services that can be produced to satisfy unlimited human needs and desires.
    • Choice is the problem of scarcity that leads to decision-making between products and services.
    • Opportunity cost is the second-best product or service that is given up in order to obtain the best product or service.

    Basic Economic Problems

    • What to produce refers to the type of goods and services to be produced.
    • How to produce refers to the cheapest method of production.
    • For whom to produce refers to the distribution of income.

    Production Possibilities Curve (PPC)

    • PPC is a graph that shows the various possible combinations of goods and services produced within a specified time period with all resources fully and efficiently employed.
    • Assumptions of PPC include only two goods, full employment and full production capacity, fixed resources, and no change in technology.
    • PPC explains basic economic concepts such as scarcity, choice, and opportunity cost.

    Shift of PPC

    • Factors that influence the shift of PPC include economic growth, improvements in technology, and natural disasters.
    • Economic growth shifts PPC outward, while natural disasters shift PPC inward.
    • Improvements in technology also shift PPC outward.

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    Related Documents

    Introduction To Microeconomics PDF

    Description

    This chapter introduces the basics of economics, covering concepts such as scarcity, choice, and opportunity cost. It also discusses economic problems and issues.

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