Scarcity and Economic Thinking
This fundamental economic problem exists because human wants are unlimited while resources are limited.
What is scarcity?
A point located directly on a country's PPC represents this type of production.
What is efficient production?
Economists calculate this by dividing what is given up by what is gained.
What is opportunity cost?
The ability to produce a good at a lower opportunity cost than another producer.
What is comparative advantage?
A table states that Sofia can produce 12 shirts or 6 pairs of shoes in one day. This is this type of comparative-advantage problem.
What is an output problem?
In economics, the word "marginal" means this.
What is additional or one more?
This calculation tells consumers how much additional benefit they receive for each dollar spent.
What is marginal benefit divided by price (MB/P)?
Land, labor, capital, and entrepreneurship are collectively known by this term.
What are the factors of production?
A point located inside a PPC indicates this condition.
What is inefficient production or underutilization of resources?
An economy can produce either 50 cars or 100 computers. The opportunity cost of producing one car is this many computers.
What are 2 computers?
The ability to produce more output using the same quantity of resources.
What is absolute advantage?
A table states that it takes Alex 4 hours to produce a chair and 6 hours to produce a table. This is this type of problem.
What is an input problem?
If the marginal benefit of an additional activity is greater than its marginal cost, a rational decision-maker should do this.
What is do more of the activity?
A movie has a marginal benefit of 60 and costs $10. Its marginal benefit per dollar is this.
What is 6?
Education, knowledge, training, and skills that increase a worker's productivity are called this.
What is human capital?
This shape of PPC illustrates increasing opportunity costs.
What is a bowed-out PPC?
An economy can produce either 80 pizzas or 40 bicycles. The opportunity cost of one pizza is this many bicycles.
What is ½ bicycle?
Country A can produce 40 cars or 80 computers. Country B can produce 30 cars or 90 computers. This country has the comparative advantage in cars.
Answer: What is Country A?
A gives up 2 computers per car; B gives up 3.
When determining absolute advantage in an output problem, the producer with this type of number has the absolute advantage.
What is the higher number?
A student receives $40 of marginal benefit from a fourth hour of studying while facing a marginal cost of $25. This is the student's net marginal benefit from the fourth hour.
What is $15?
Good A has MU = 40 and costs $5. Good B has MU = 60 and costs $10. A rational consumer should purchase this good next.
What is Good A?
A: 40/5 = 8; B: 60/10 = 6.
The value of the next-best alternative that must be given up when a decision is made.
What is opportunity cost?
An increase in the quantity or quality of productive resources would cause this change to a country's PPC.
What is an outward shift?
As an economy moves along a bowed-out PPC and produces more of one good, this generally happens to the opportunity cost of producing additional units of that good.
What is opportunity cost increases?
Country A's opportunity cost of one pizza is 2 sandwiches, while Country B's is 5 sandwiches. Give one whole-number mutually beneficial term of trade for one pizza.
What is 1 pizza for 3 sandwiches or 1 pizza for 4 sandwiches?
When determining absolute advantage in an input problem, the producer with this type of number has the absolute advantage.
What is the lower number?
Total benefit increases from $180 at three units to $220 at four units. Total cost increases from $90 to $125. Calculate the MB and MC of the fourth unit.
What are MB = $40 and MC = $35?
Complete the utility-maximizing condition for two goods:
MU/P of X =
MU/P of Y
A student can either work for three hours earning $18 per hour or attend a free concert. Ignoring other costs, this is the student's opportunity cost of attending the concert.
What is $54 in forgone wages?
A technological improvement increases productivity only in computer production while agricultural productivity remains unchanged. This happens to the country's PPC.
What is a pivot outward toward the computer axis?
Country X can produce 30 computers or 90 tablets. Country Y can produce 50 computers or 100 tablets. This country has the lower opportunity cost of producing computers.
What is Country Y?
Country A can produce more of both goods than Country B. This economic principle explains why the two countries can nevertheless benefit from specialization and trade.
What is comparative advantage?
Country A's opportunity cost of one computer is 2 tablets, and Country B's opportunity cost is 6 tablets. Identify the range of mutually beneficial terms of trade for one computer.
What is more than 2 but less than 6 tablets per computer?
The first four units of an activity have MBs of $80, $60, $40, and $20 and MCs of $20, $30, $40, and $50. This is the optimal quantity.
What are 3 units?
The third unit has MB = MC; the fourth has MC > MB.
A consumer currently has:
MU/P of A = 4
and
MU/P of B = 7
To increase total utility, the consumer should make this change in consumption.
What is consume more of Good B and less of Good A?
FINAL JEOPARDY!
Calculating Margins
A consumer has $40 to spend on Good X and Good Y.
Which good should the consumer purchase next, and why?
MUX/PX=40/10=4
MUY/PY=100/20=5
Therefore, the consumer should purchase Good Y because it provides the greater marginal utility per dollar spent.