Questions and Answers
What is the definition of profit?
What is the definition of opportunity cost?
The item or opportunity forgone by a choice
On a production possibility curve, data points that fall outside of the curve represent?
Unobtainable production
What does scarcity force all people and groups to do?
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What is the amount of money you are not earning at work by staying in school?
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What does inefficiency refer to in production possibilities?
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What is a graphical representation of the combination of goods and services?
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Assessing opportunity cost involves?
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What is a shortage?
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What is marginal thinking?
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What does growth refer to in terms of the production possibilities curve?
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Producers can create any combination of goods they wish, as long as they?
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What is the definition of revenue?
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Opportunity cost occurs because of a producer's need to?
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Which of the following lists what we sacrifice by making a choice?
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Study Notes
Economic Concepts Related to Opportunity Cost
- Profit: The surplus obtained from revenues after deducting all associated costs.
- Opportunity Cost: The value associated with the next best alternative that is forgone when making a choice.
- Scarcity: A fundamental economic problem resulting from limited resources that compels individuals and societies to make decisions.
- Shortage: A temporary condition where the supply of a good or service is insufficient to meet demand, resulting from factors that can be uncontrollable or deliberate.
Production and Efficiency
- Production Possibility Curve (PPC): A graphical tool depicting various combinations of goods and services that can be produced with available resources and technology.
- Unobtainable Production: Points beyond the PPC indicate production levels that cannot currently be achieved given the available resources.
- Inefficiency: Represented by points inside the PPC, indicating underutilization of resources.
- Growth: An outward shift of the PPC signifies an increase in an economy's capacity to produce goods and services.
Decision-Making and Resource Allocation
- Marginal Thinking: Analyzing the additional benefits versus the costs of producing one more unit of a good or service.
- Resource Allocation: The process producers use to distribute resources effectively among different goods and services to meet economic demands.
- Assessing Opportunity Cost: Involves evaluating choices and understanding the trade-offs and potential consequences of those choices.
Revenue and Financial Implications
- Revenue: The total earnings generated from the sales of products or services before any expenses are deducted.
- Implication of Staying in School: Opportunity cost is exemplified by incomes forgone when a student opts for education over immediate employment, representing a significant decision in personal finance.
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Description
Test your understanding of key economic concepts with these flashcards focused on opportunity cost and related terms. Each card defines crucial vocabulary that plays a role in decision-making and economic theory. Perfect for students or anyone looking to enhance their knowledge in economics.
