Question

unit 1 - study questions

1. what is scarcity?
2. what are productive resources used for?
3. explain opportunity cost.
4. what is human capital?
5. give two examples of each factor of production / productive resource:

• land
• labor
• capital

1. who makes all the economic decisions in a command economy?
2. who makes all the economic decisions in a market economy?
3. what is a production possibilities graph used to show?
4. what does any point on the curve of a production possibilities curve mean/represent?
5. how do you know that a rational decision has been made?
6. how do people respond to incentives?
7. ______________ can help a business use its resources more efficiently. this means sticking to what its good at doing. example: zaxbys makes chicken fingers, not hamburge

Explanation:

1. Defined as the fundamental economic condition where unlimited human wants exceed limited available resources.
2. Used to produce goods and services to satisfy consumer wants.
3. The value of the next-best alternative that is forgone when making a choice.
4. The knowledge, skills, education, and experience that workers possess, which boosts their productive capacity.
5. Examples tied to core production factors:

• Land: Natural resources for production
• Labor: Human effort in production
• Capital: Man-made production tools

1. Centralized government/state authority controls all economic choices.
2. Private individuals and businesses (driven by supply/demand) make choices.
3. Illustrates maximum output combinations of two goods with fixed resources.
4. Represents efficient full utilization of available resources.
5. When the marginal benefit of a choice equals or exceeds its marginal cost.
6. People act to pursue rewards and avoid penalties, adjusting behavior to gain benefits or reduce losses.
7. Focusing on a specific production task to boost efficiency, matching the given example.

Answer:

1. Scarcity is the basic economic problem where unlimited human wants and needs exceed the limited resources available to fulfill them.
2. Productive resources are used to produce goods and services that satisfy people's wants and needs.
3. Opportunity cost is the value of the best alternative that is given up when a choice is made (the next-best foregone option).
4. Human capital refers to the knowledge, skills, education, and experience that workers acquire, which increases their ability to produce goods and services.

5.

• Land: Oil reserves, agricultural farmland
• Labor: A teacher's classroom instruction, a construction worker's physical labor
• Capital: A factory assembly line, a delivery truck

1. The central government (or a centralized authority/state planners) makes all economic decisions in a command economy.
2. Private individuals and businesses (driven by supply and demand in free markets) make all economic decisions in a market economy.
3. A production possibilities graph is used to show the maximum combinations of two goods or services that can be produced with a fixed amount of resources and technology.
4. Any point on the production possibilities curve represents an efficient level of production, where all available resources are fully and optimally used to produce a combination of goods.
5. A rational decision is made when the marginal benefit of the choice is greater than or equal to the marginal cost of that choice.
6. People respond to incentives by changing their behavior: they tend to pursue actions that offer rewards (positive incentives) and avoid actions that result in penalties (negative incentives).
7. Specialization