Microeconomic Principles for Daily Life - Exam Solution Manual Chapter 1,
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Course
Business commerce
Institution
Business Commerce
Scarcity - Answers Every choice involves a trade-off. When you cannot have everything you want at once due to inadequate resources such as time, money, and energy. Arises because time, money, and energy are limited and human wants are not. Ex. Governments sometimes need to make trade-offs when deci...
Microeconomic Principles for Daily Life - Exam Solution Manual Chapter 1
Scarcity - Answers Every choice involves a trade-off. When you cannot have everything you want at once
due to inadequate resources such as time, money, and energy. Arises because time, money, and energy
are limited and human wants are not. Ex. Governments sometimes need to make trade-offs when
deciding what programs to fund (ie. Should we put more money towards education even if it means
cutting the amount of money for healthcare?)
Economics - Answers How individuals, governments, and businesses make the best possible decisions
that they have to make as a result of scarcity, and how these decisions impact markets.
Opportunity Cost - Answers The cost of the best opportunity given up.
Incentives - Answers Rewards and penalties for choices.
Money cost - Answers A monetary measure of the benefits forgone when a choice is made.
Irony of voluntary trade - Answers Although we are not as good at supporting ourselves as individuals,
collectively, we are better off.
With voluntary trade, each person feels like . . . - Answers . . . the value of what they get is greater than
the value of what they gave up.
Production Possibilities Frontier - Answers The maximum combinations of products or services that can
be produced with existing inputs. The shaded area inside the graph represents possible combinations.
Outside of the shaded area are impossible combinations. For example, the maximum amount of bread
Jill can make, and the maximum amount of wood she can chop.
Absolute advantage - Answers The ability to produce something at a lower absolute cost than another
producer. Ex. Jill can produce BOTH bread and wood at a more efficient rate than Marie.
Mutually beneficial gains from trade depend on . . . - Answers . . . comparative advantage
Opportunity Cost = - Answers give up/get
Comparative advantage - Answers The ability to produce a product or a service at a lower opportunity
cost than another producer. So, the ability to be able to have what you're giving up being
Model - Answers Simplified version of a real process that illustrates what is necessary for understanding.
Inputs - Answers Everything that goes into making products and services, including: labor, natural
resources, capital equipment, and entrepreneurial ability.
Input markets - Answers Where businesses buy the inputs they need to produce products and services.
Output markets - Answers Where businesses sell their products and services.
Economic models assume . . . - Answers . . . all other things not in the model are unchanged.
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