Quest 1Opportunity and Scarcity

What to do, how to do it, and who will get ito The questions economics try to answer

The study of how people, businesses, governments and other institutions make decisions when faced with scarce resources

o Economics Economics is the study of

o the allocation and use of scarce resources to satisfy unlimited human wants Scarce resources makes us

o Make economic decisions Limited resources and unlimited wants creates

o Scarcity Opportunity cost of saving the engineer

o The three children that died Opportunity cost of saving the 3rd and 4th child

o The engineer We must make a choice about the number of boxes of food to take away from the

wrecked pod because of space on transporto Scarce

Having enough saline is he opportunity cost of o Loading too much food onto the transport

Another way to say limited resourceso Scarcity

Quest 2Marginal Analysis and Diminishing Returns by the Numbers

What is the marginal benefit of the 2nd hour of practice to his points per gameo 3

If the total benefit of something is increasing at a decreasing rate as more of it is consumed, then marginal benefit of each additional unit consumed is

o Positive but decreasing in value As you do more and more of something the marginal benefits of doing it tend to _____

and marginal cost tend to ______o Decline; rise

If at the age of 21 Lamont scored 32.5 points per game, you would say that as he got older his points per game were ______ at a ______ rate

o Increasing; decreasingProduction Possibility Frontiers

What does ppf stand foro Production possibility frontier

What does a ppf doo Shows the possible production combinations

What should you do if the marginal benefit of an action is greater that its marginal costo You should do it

Which of the following is an example of marginal cost/benefit analysis? Comparing the cost of

o Adding one more salt tablet to the extra benefit of adding the same salt tablet Constant opportunity costs is another way to say this

o You repeatedly gibe up the same thing for each additional item addedGame Show

What is the extra benefit gained from adding one moreo Marginal benefit

Scarcity createso All of the above

Points inside the ppf represento Unemployment

The slope of the ppf measureso The opportunity cost of producing another unit of x

If the ppf shifts parallelo The opportunity cost of producing both goods remains unchanged

Point c outside the ppf iso Unattainable

What happened to the ppf when the labor force decreasedo The ppf shifted in

The reciprocal of the slop (1/slope) of the ppf measureso The marginal cost of producing another unit of good y

If the ppf shifts parallelo Less of everything can be produced

The slope of the ppf is calculated by computingo The change in y over the change in x

What is the extra cost of adding one moreo Marginal cost

What does point D represento The Sarbonians NOT using all of their available resources to produce goods

Quest 3Impact of Technology

What is the basic purpose of technologyo To increase productivity

All of the following would increase productivity excepto Demolishing a building

What was Og the caveman’s first attempt to increase his bird-huntingo Throwing a stone

Why did Og replace the stone with the spearo He caught more birds with the spear

Opportunity Cost by the Numbers What does the equation look like that calculates the opportunity cost for collecting 1

unit of meat instead of berrieso Opportunity cost of meat=berries/meat

What does the equation look like that calculates the opportunity cost for collecting 1 unit of berries instead of meat

o Opportunity cost of berries=meat/berries Suppose you decide to watch TV for an hour instead of spending time either studying for

1 hour or going jogging for 1 hour. What is the economic price associated with this decision

o 1 hour of time studying or I hour of time jogging If you were to say the opportunity cost of 1 chopstick is 15 toothpicks, you actually

mean thiso What is the loss of 1 chopstick for the production of 15 toothpicks

Not being able to use the energy canisters for something else is an example of thiso What is the opportunity cost of opening the doors in the pod

Diminishing returns means that o After a certain point, additional effort brings forth less benefit

This is the best way of explaining diminishing marginal returnso Why do the benefits gained get smaller and smaller fomr adding more and more

This is why, given our hunting equipment and talent, we can only shoot so many rabbits per day

o Diminishing marginal returns This is why we were able to bring back 8 dead rabbits on this hunting trip

o What is marginal benefit This is why we have to give up gathering berries to hunt rabbits

o What is opportunity cost This concept explains why each round of training doesn’t bring in about the same

increase in hunting productivityo What is diminishing marginal returns

This is why we can’t gather 5 units of water 9 units of berries and 2 rabbits per worker per day

o What is scarcity This would initially yield a larger marginal return if employed by the workers

o What is more effective equipment This would raise the opportunity cost of gathering berries

o What is larger water buckets

This would lower the productivity of workerso What is attrition of equipment

The addition of new workers would affect the ppf in this fashiono What is an outward shift of the ppf

The loss of 2 workers would affect he ppf in this fashiono What is an inward shift of the ppf

Higher levels of hunting productivity shifted the ppf _________ along the meat axis. This shift in ppf translated into ___________ consumption potential

o Outwards; higher Because the training and improved hunting productivity and did not impact berry

productivity the opportunity cost of hunting ____________ and the opportunity cost of gathering berries ___________

o Decreased, increasing Additional training ___________ total productivity at a _______________ rate

o Increased, decreasing In the short-run

o At least one input in the production process is fixed In the long –run

o All inputs in the production process are variable Diminishing returns are more likely to be caused by

o Fixed input constraints Diminishing returns are more likely to be experienced in

o The short-run Technological improvements bring about

o All of the above Ogs increased productivity at hunting would

o Shift his ppf to the right Which describes John Locke’s approach to distribute justice

o Those who work herder deserve more reward Which describes John Rawls’ ideas about distribute justice

o Goods should be distributed according to people’s needs, regardless at effort All fo the following are advantages of rewarding people based on how much produce

excepto All people will receive the basic goods they need

Which is not an advantage of distributing goods equally, regardless of efforto Everyone will receive the goods they need

Game Show Scarce resources make use do this

o What is all of the above This would lower the productivity of the workers

o What is the deterioration of equipment

Increases in training leads too Increased productivity at a diminishing rate

The ppf would shift in this fashion if production was shifted towards more berrieso What is the ppf will not shift

This is the best way to explain diminishing returnso What is the more you add, the les return you get?

Marginal analysis implies people make choices byo Comparing the additional benefits against the additional costs

If the berry bushes yielded twice as much fruit, the opportunity cost of gathering berries would __________ and the opportunity cost of hunting rabbits would _______

o Fall; rise This is why, given our hunting equipment, we can only shoot so many rabbits per day

o There are productivity constraints due to fixed production input