Chapter 2 - Prep Quiz

Question 1

What is a property right?

Answer 1

a social arrangement that governs the ownership, use, and disposal of anything that people value

Question 2

When the quantity of capital in an economy increases…

Answer 2

economic growth occurs, but it is not free

Question 3

Harry produces 9 balloon rides and 9 boat rides an hour.
Harry could produce more balloon rides without producing fewer boat rides.
Where is Harry producing on his PPF?
1. On
2. Moving long
3. Producing outside
4. Producing inside

Answer 3

4. Producing insite.

Producing outside of PPF is NOT POSSIBLE, given resourse SCARCITY

Question 4

How is production efficiency achieved?
- Have some unused resources
- Do not face a tradeoff
- Produce goods and services at the lowest possible cost
- Produce at a point inside the PPF

Answer 4

By producing goods and services at the lowest possible cost.

WHY NOT INSIDE PPF?:
If we produce at a point inside the PPF​, we are giving up more than necessary of one good to produce a given quantity of the other good.
This is not the point of production​ efficiency.

Question 5

An economy that uses technology…

Answer 5

has increase in standard of living but does not overcome scarcity

Question 6

• Assuming y-axis is Capital Goods and x-axis is Consumption Goods…
  If a Point A is higher on a PPF (therefore more on the left) than Point B, what does that mean for Point A?

Answer 6

Point A consumes less than Point B, but will grow faster than Point B

Question 7

True or false: The invention of paper money and coins made trading in markets less efficient than trading one good for another.

Answer 7

False

Question 8

What happens to the economy when moving along the PPF?

Outside of the two goods

Answer 8

All other goods other than Good X and Good Y on the PPF remain constant

Question 9

Why is the marginal cost curve upward sloping?

Answer 9

Because resources are not all equally productive in all activities