1.1 - 1.2 basics
these two truths mean we will always have scarcity
unlimited wants
limited resources
PPC stands for . . .
Product possibilities Curve
a country that can produce more of a g/s than another country has a(n) ____________. _______________
absolute advantage
A city will undertake road repairs if
a)costs outweigh benefits
b)costs are marginal
c)benefits per $ spent are marginal
d)benefits are measured in utils and divided by $
a) costs outweigh benefits
total utility is at its highest when Marginal utility is at:
0
The three economic questions socieities must answer
what to produce?
How to produce it?
for whom to produce?
Constant opportunity costs are shown on a PPC by . . .
a straight line for the the curve
a country that can produce a g/s for a lower opportunity cost than another country is said to have a __________ _______________
comparative advantage
which is an implicit cost of buying a new car?
a)the decision to buy a warranty
b)purchasing gas for the car
c)the lost chance to purchase a motorcycle
d)the costs of the IL state title, insurance, and parking sticker
c)
for goods x and y, when MUx/Px = MUy/Py for a consumer we can say s/he has reached . . .
maximum utility.
the next best opportunity that is forgone when a decision is made to produce or consume
opportunity cost
a country that makes either robots or corn, or a combination of both is likely to have a _________ PPC
curved, bowed out
this British economist first published on the idea of specialize and trade as a way for countries to get wealthier.
David Ricardo
T/F: accounting profits include the cost of the depreciating capital
True
Darrel purchase apple pies and cases of beer. The MU of his last apple pie is 60 and each pie costs 20$. The MU of his last case of beer is 25 and the cost of it was $12.50. How should he continue to consume?
he should buy more pie because MUb/Pb = 2 while MUp/Pp = 3
When a good runs out because the price is set too low in a market economy
Shortage
the reason for a bowed out PPC is . . .
resources for the production of one g/s are not easily adaptable to production of another
India can produce 80 spools of cloth or 40 robots.
Sri Lanka can produce 75 spools of cloth and 15 robots.
we can say that Sri Lanka has a comparative advantage in the production of ______________
cloth
an example of an implicit cost of capital is:
a) a restauranteur selling her oven and putting the proceeds in the bank at interest
b) a restauranteur renting out her oven to ice fisherman to keep them warm on their fishing trip
c) both a and b
d) neither a and b
c) both a and b
Delroy's total benefit after buying a classic toy car was 300. His TB after buying another one was 450. each classic car cost him $50. What is his marginal utility per dollar of his second car?
450-300 = 150
150 / 50 = 3
the 4 factors of production
land, labor, capital, entrepreneurship
productive efficiency in a PPC is shown by . . .
a point ON the PPC
Scotland can produce 100 wool sweaters and 20 cases of Port wine.
Portugal can produce 80 wool sweaters and 120 cases of port wine.
what are terms of trade for a wool sweater that would benefit both countries and what product should each export?
Scotland Exports wool sweaters
Portugal exports port wine
a wool sweater should be traded for anywhere BETWEEN 1/5 of a case of port wine and 1.5 of a case of port wine (but NOT on either of those values)
economic profits of 0 are:
a) accounting profits
b) a sign to get out of that market
c) opportunity costs
d) normal profits
d) normal profits
Mr. H. eats hot chili peppers with his food. Each pepper costs 5 cents. He gets 10 utils from the first, 9 from the second, 8 from the 3rd, 5 from the fourth, and 1 from the fifth.
What is the marginal utility per penny of the 3rd chili pepper. How much value has been lost since the first.
1.6 cents is the MU/p of the 3rd chili
.4 cents of value has been lost since the first chili pepper. (10/5 - 8/5).