Production Possibility Frontier & Opportunity Cost, pt 2 v-q

What does scarcity force people to do?

• Make a choice

• Ignore resources

• Increase production only

• Avoid opportunity cost

What is opportunity cost?

• The value of the next-best alternative when a decision is made

• The total cost of all alternatives

• The price of a product

• The amount of money spent

What is given up when a decision is made, according to the concept of opportunity cost?

• The next-best alternative

• The most expensive option

• The least valuable option

• The first option considered

What does a point inside the production possibilities frontier represent?

• Underemployment

• Full employment

• Economic expansion

• Maximum production

What does movement back toward the frontier reflect?

• Economic expansion

• Economic contraction

• Decreased opportunity cost

• Increased scarcity

If Econ Isle could produce 4 gadgets and 4 widgets, but only produces 2 of each, what does this indicate?

• Underemployment

• Full employment

• Overemployment

• Economic expansion

What does the PPF curve show about choices and trade-offs?

• Every choice has an opportunity cost

• Choices have no consequences

• Trade-offs are unnecessary

• All resources are unlimited

If a country is producing inside its PPF, what does this indicate about its resource use?

• Resources are underutilized

• Resources are fully utilized

• Resources are overutilized

• Resources are not available

What is the relationship between opportunity cost and decision making?

• Every decision involves giving up the next-best alternative

• Decisions have no cost

• Opportunity cost is irrelevant to decisions

• Only financial decisions have opportunity cost

What happens if an economy is not fully employing its resources?

• It operates inside the PPF

• It operates on the PPF

• It operates outside the PPF

• It cannot produce anything