PPC Curves
Any point on the PPC curve is considered what?
Efficient (Productively efficient)
Any point inside the PPC curve is considered what?
Inefficient
What is opportunity cost?
What you're giving up by deciding to do something else. The next best alternative you forgo by making another decision.
Microeconomics or Macroeconomics?
The demand for electric cars goes up when gas prices go down.
Microeconomics
What are the 2 factors that influence economic growth?
Increase/decrease of available resources
Improvement/decline of technology
It shifts outward (away from the center)
If I can produce more of both goods, am I producing efficiently?
No you are inefficient
The enjoyment I would have gotten from the dinner
People should pay their taxes to avoid the consequences from the IRS
Normative
What does the term "marginal" mean?
One additional or one more
What does the PPC NOT show us?
The allocatively efficient or best points
What's the difference between allocatively efficient and productively efficient?
Allocative: This one combination maximizes my happiness/profit.
I can either buy a vacation for $500 or get a used car for $500. If I choose to buy the vacation, what's my opportunity cost?
The benefits of having the car
Microeconomics or Macroeconomics?
The national interest rate is slowly lowering, making it easier for people to borrow money.
Macroeconomics
Command economy
What does a PPC show us?
What combinations of 2 goods we can make with the resources we have. OR
The opportunity costs of producing more of one good. OR
The productively efficient combinations given the resources we have.
Can we see productively efficient points on the PPC? Can we see allocatively efficient points on the PPC?
We can see productively efficient points but not allocatively efficient ones.
What is the opportunity cost of sleeping in based on the ranking of my options of what to do on a Saturday below:
1. Sleep in
2. Go to the beach
3. Hang out with friends at someone else's place
4. Go see your extended families
5. Workout all day
Going to the beach
Positive or Normative?
The demand for electric cars goes up when gas prices go down.
Positive
How do property rights incentivize people to maximize the value of what they own?
Because they can either sell it back for money or don't have to pay for replacements or broken parts.
Why does a PPC typically bow outward (is curved outward)?
What does it mean to be efficient?
I can't produce more of one good without sacrificing the production of another.
If my opportunity cost of going to school (sleeping) is higher than the benefit from going to school, what should I do?
I should sleep and not go to school
Positive or Normative?
Many people believe the Fed should lower interest rates to lower inflation.
Positive
I should keep buying a good until what point? (In other words: how do I know what is the optimal amount of something I should buy?)
When the marginal benefit equals the marginal cost