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Exam 1 Study Guide

Exam 1 Study Guide - Essay Questions Ch 1#8 Explain what...

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Essay Questions: Ch. 1  #8 Explain what the term “economizing problem” means for an individual and for society. (p.  7, 10) Economizing problem – the need to make choices because economic wants exceed economic  means Individual: Limited income Unlimited wants Budget line (budget constraint) Attainable and unattainable combinations of purchases Tradeoffs and opportunity costs Choice Income changes Society: Scarce resources Resource categories Land Labor Capital Entrepreneurial ability #13 What determines the optimal product mix for society’s production possibilities? (p. 13) Economic decisions center on comparisons between marginal benefit (MB) and marginal cost  (MC). The optimal amount of the product mix occurs when MB=MC.  #17 Explain the tradeoff between goods for the present and goods for the future & the effect  of this tradeoff on economic growth. (p. 16-18)
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An economy’s current choice of positions on its production possibilities curve helps determine  the future location of that curve.  Goods for the future: capital goods, research and education, & preventive medicine Increase the quantity and quality of property resources, enlarge the stock of  technological information, & improve the quality of human resource Are the ingredients of economic growth Goods for the present: consumer goods (ie. Food, clothing, and entertainment) An economy’s present choice of capital and consumer goods helps determine the future  location of its production possibilities curve.  #18 What qualification does internal specialization and trade make for the interpretation of  production possibilities? (p. 18) Internal specialization & trade enable a nation to obtain more goods than its production  possibilities curve indicates.
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Exam 1 Study Guide - Essay Questions Ch 1#8 Explain what...

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