Deck 26: Scarcity and Choice Neoclassical View

Question 1

Whats defention of terms:
-choice

Answer 1

the producer's decision of what raw materials and technology to use; the consumer's decision of which goods he or she wants to consume

Question 2

Whats defention of terms:
-institutions

Answer 2

sets of customs, laws, and norms that influence, enable, or constrain human behavior

Question 3

Whats defention of terms:
-resources

Answer 3

the assets needed in production and development of an economy, including land, labor, capital, and time

Question 4

Whats defention of terms:
-scarcity

Question 5

Whats defention of terms:
-attainable region

Question 6

Whats defention of terms:
-comparative Advantage

Question 7

Whats defention of terms:
-constant marginal opportunity costs

Question 8

Whats defention of terms:
-Institutions

Question 9

Whats defention of terms:
-law of increasing marginal opportunity costs

Question 10

Whats defention of terms:
-marginal cost

Question 11

Whats defention of terms:
-opportunity cost

Question 12

Whats defention of terms:
-production possibilities curve (PPC)

Question 13

Whats defention of terms:
-resources/inputs

Question 14

Whats defention of terms:
-technology

Question 15

Whats defention of terms:
-trade-offs

Question 16

Whats defention of terms:
-unattainable region

Question 17

Explain the concept of scarcity and how people make choices according to neoclassical analysis.
-List the underlying assumptions that neoclassical economist make about people.

Question 18

Explain the concept of scarcity and how people make choices according to neoclassical analysis.
-Explain the foundation of neoclassical analysis. What are two key assumptions made about people and how they make decisions?

Question 19

Explain the concept of scarcity and how people make choices according to neoclassical analysis.
-What creates scarcity, according to neoclassical analysis? Explain the difference between what people need and what people want and desire and how this difference creates scarcity.

Question 20

Describe how the production possibilities curve captures production choices in a society.
-Explain what the production possibilities curve (PPC) demonstrates. What assumptions are made when creating a PPC?

Question 21

Describe how the production possibilities curve captures production choices in a society.
-What does it mean if a society is producing on the frontier or directly on the PPC?

Question 22

Describe how the production possibilities curve captures production choices in a society.
-If a society is producing on the frontier, what happens if society decides it wants more of one of the goods being produced?

Question 23

Describe how the production possibilities curve captures production choices in a society.
-Is it

Question 24

Describe what progressive economists see as the primary shortcomings of the neoclassical scarcity perspective.
-What is the progressive criticism of the analysis of the economy, starting with isolated individuals? What is the critique of the assumptions about individuals and how individuals make decisions? What is the progressive alternative?

Question 25

Describe what progressive economists see as the primary shortcomings of the neoclassical scarcity perspective.
-Why is the context in which individuals make decisions important? How do social and cultural norms play into how individuals make decisions? Give an example of how a social norm may influence an economic decision.

Question 26

Describe what progressive economists see as the primary shortcomings of the neoclassical scarcity perspective.
-What is the progressive criticism of the neoclassical notion of scarcity? Give a specific example. What is the progressive alternative?

Question 27

Describe what progressive economists see as the primary shortcomings of the neoclassical scarcity perspective.
-A progressive economist would claim we should not assume a market economy is always producing on the PPC. Explain. What does this mean about the decision to produce additional amounts of one good? Both goods?

Question 28

Describe what progressive economists see as the primary shortcomings of the neoclassical scarcity perspective.
-Progressive economists claim the types of choices different people make are very different from the simple choices presented in the overview of neoclassical choice. Explain.

Question 29

List the assumptions behind the PPC
-What do we assume about inputs, institutions, and technology in building the PPC?

Question 30

List the assumptions behind the PPC
-What does the PPC represent?

Question 31

List the assumptions behind the PPC
-What does marginal cost mean? Create an example of a marginal cost.

Question 32

List the assumptions behind the PPC
-When you decide to produce more of one good on the PC, what is the "cost" Explain.

Question 33

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-Draw a PPC diagram and illustrate the attainable region and unattainable region. Label a combination of goods representing efficient production.

Question 34

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-Why are typical textbook PPCs bowed outward?

Question 35

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-What does it mean when PPCs are illustrated with a straight line?

Question 36

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-Draw a linear PPC. Label two points on this diagram and explain how these points are consistent with the idea of constant marginal opportunity costs.

Question 37

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-Draw a concave PPC. Label two points on this diagram and how these points are consistent with the law of increasing opportunity costs.

Question 38

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-Draw a linear PPC like that illustrating the work of Student Painters. On the vertical axis, label large houses, and on the horizontal axis, put small houses. Assume that the company begins using a special kind of scaffolding for painting big houses. However, setting it up takes time, so it is not useful for painting small houses. How will the firm's PPC be affected by this new resource?

Question 39

Use the PPC to illustrate scarcity, choice, constant opportunity costs, and the law of increasing marginal opportunity cost.
-In the 1980s, rates of growth in Japan were higher than in the United States. One argument given for the stronger growth in Japan was higher level s of investment. Draw a PPC for both the United States and Japan. On the axes, label the goods as investment goods and consumption goods. Use these two diagrams to explain why Japan experienced faster growth than did the United States.

Question 40

Explain why and how changes in technology, resources, and institutions influence the PPC.
-What would cause a parallel shift in a PPC? What would cause a change in its slope?

Question 41

Explain why and how changes in technology, resources, and institutions influence the PPC.
-Give an example of how a change in technology might have an effect on the production of one good and not the other, and illustrate this situation with a PPC. What changed in the graph?

Question 42

Explain why and how changes in technology, resources, and institutions influence the PPC.
-What kind of institutional changes could cause an increase in production even though no other inputs increased and no technology changed?

Question 43

Explain why and how changes in technology, resources, and institutions influence the PPC.
-Assume a hurricane devastated an island economy that produced only coconuts and bamboo. Demonstrate this event on the island's PPC.

Question 44

According to neoclassical economists, the central economic problem is

A) rapid technological change
B) unchecked population growth.
C) choice due to the existence of scarcity
D) the distribution of income.

Question 45

Neoclassical economists make a number of assumptions about people. Which of the following is not a basic assumption of neoclassical economics?

A) People often make irrational decisions.
B) People make decisions in their own self-interest.
C) People have unlimited wants and desires.
D) People weigh costs and benefits in making decisions.

Question 46

What is the attitude of neoclassical economists toward scarcity?

A) scarcity results from the unlimited desires of people.
B) scarcity can be solved by the operation of the free market.
C) scarcity is the result of speculators trying to drive up prices.
D) scarcity is a hoax perpetuated by radical environmentalists.

Question 47

What do progressive economists mean by the term, "institutions?"

A) business associations such as the Chamber of Commerce.
B) international organizations such as the United Nations.
C) social systems, habits and customs that influence human behavior.
D) major governmental bodies such as the Congress and the Supreme court.

Question 48

The Production Possibilities Curve is a device designed to demonstrate what principle?

A) the existence of trade-offs.
B) the effect of consumer demand on prices.
C) the effect of unlimited resources on production decisions.
D) that there are no limits to production possibilities.

Question 49

Which of the following would fall into the category of "resources?"

A) ice cream
B) lumber
C) bread
D) a cell phone

Question 50

What do economists mean by "technology?"

A) computers and other electronic devices.
B) equipment used to produce other goods.
C) knowledge, techniques and tools used to produce goods.
D) software

Question 51

What is the definition of opportunity cost?

A) the costs of expanding your opportunities.
B) the cost of not taking advantage of your opportunities.
C) the cost of the best alternative that you choose.
D) the cost of the best alternative that you do not choose.

Question 52

What is the definition of marginal cost?

A) the cost of buying things on the margin.
B) the additional cost of producing an additional item.
C) the average cost per unit.
D) the cost of buying a stock online.

Question 53

-In Diagram 26.1a, Point X represents

A) a production possibility that is not presently attainable.
B) a production possibility that is attainable and efficient.
C) a production possibility that is attainable but inefficient.
D) a increasing opportunity costs.

Question 54

-In Diagram 26.1a, Point W represents

A) a production possibility that is not presently attainable.
B) a production possibility that is attainable and efficient.
C) a production possibility that is attainable but inefficient.
D) a increasing opportunity costs.

Question 55

-In Diagram 26.1a, Point Y represents

A) a production possibility that is not presently attainable.
B) a production possibility that is attainable and efficient.
C) a production possibility that is attainable but inefficient.
D) a increasing opportunity costs.

Question 56

-The production possibilities curve depicted in Diagram 26.1 reflects

A) increasing opportunity costs
B) decreasing opportunity costs
C) constant opportunity costs.
D) the absence of opportunity costs.

Question 57

-The shift in the production possibilities curve in Diagram 26.1b means

A) An improvement in painting technology suitable for both large and small houses.
B) An improvement in painting technology suitable only for small houses.
C) An improvement in painting technology suitable only for large houses.
D) An increase in the price of large houses.

Question 58

-The production possibilities curve shown in Diagram 26.1c reflects

A) constant opportunity costs
B) increasing opportunity costs
C) no opportunity costs.
D) unlimited resources.

Question 59

-The shift in the production possibilities curve shown in Diagram 26.1c reflects

A) an increase in resources used in the production of both goods.
B) a decrease in resources used in the production of both goods.
C) an decrease in resources used in the production of bamboo only.
D) an decrease in resources used in the production of coconuts only.