Economic Basics
This fundamental economic problem exists because wants are unlimited while resources are limited.
Scarcity
A point inside a PPC represents this type of production.
Inefficient
or Unemployment of resources
A student studies one additional hour because the expected benefit exceeds the additional cost. This type of analysis is being used.
Marginal analysis
If one producer can produce more of a good using the same resources, that producer has this type of advantage.
Absolute advantage
To compare the value received from goods with different prices, economists calculate this quantity through:
Marginal Utility per Dollar
((MuA)/($B)) = ((MuB)/($B))
Land, Labor, Capital, and Entrepreneurship are collectively known as these.
4 Factors of Production
An economy moves from producing 20 computers and 50 phones to 25 computers and 40 phones. This is the opportunity cost of the 5 additional computers.
10 phones
A firm's MB of producing its 8th unit is $14 and MC is $11. The firm should _______
Produce the 8th unit
Countries can increase total production when they specialize according to this type of advantage.
Comparative advantage
Pizza provides 60 MU and cost $6. Tacos provide 45 MU and cost $3. This good provides greater marginal utility per dollar.
Tacos
15 > 10
A statement such as "The government should provide free college tuition" is this type of economic statement
Normative statement
A linear PPC demonstrates this economic principal
Constant opportunity costs
A student is deciding whether to work one additional hour at their job. The additional hour provides a marginal benefit of $24, but the student values the lost study/free time at $18. According to marginal analysis, what should the student do?
Work (Net +6)
Ava can make 12 pizzas or 6 cakes. This is Ava's opportunity cost of producing one cake.
2 pizzas
MU/P for pizza is 8, while MU/P for tacos is 12. To move toward utility maximization, the consumer should buy more of this good.
Tacos
You already paid $15 to enter a movie. After 20 minutes, you hate it. The $15 admission price should not affect whether you stay because it is this type of cost.
A bowed-out PPC demonstrates this economic principle.
Increasing opportunity cost
The economic principle that consuming additional units of the same good generally provides smaller and smaller additions to satisfaction
Law of diminishing marginal utility
Jordan can produce 20 shirts or 10 hats.
Taylor can produce 12 shirts or 12 hats.
This person has the comparative advantage in hats.
Taylor
A reward or consequence that influences an individual's economic behavior
Incentive
A town can spend its final $100,000 on either a playground or road repairs. It chooses the playground. Identify the opportunity cost of the decision.
Opportunity cost of building the playground are the road repairs that are forgone.
The economic concept describing a situation in which resources are distributed toward the combination of goods and services that are most desired by society.
Allocative efficiency
The satisfaction or benefit a consumer receives from consuming a good or service
Utility
Mia can produce 30 apples or 10 oranges.
Noah can produce 24 apples or 12 oranges.
Identify who has comparative advantage in each good.
Apples = Mia (1/3 vs 1/2)
Oranges = Noah (2 vs 3)