Summary02 - CHAPTER 2 SUMMARY 1 What are the three basic...

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CHAPTER 2 SUMMARY: 1. What are the three basic economic questions that every society must answer? The three basic questions that every society must answer are: what will be produced, how will it be produced, and who will get what is produced. Taken together, these three questions comprise the basic economic problem. 2. What do economists mean by scarcity and how is scarcity related to choice? Scarcity arises from the fact that there are limited resources in the world but that people often behave as if we have unlimited wants. Because we can't have it all, scarcity forces us to choose between alternatives. 3. What are the opportunity costs of the choices you make? The opportunity cost of a decision is the value of the most desired alternative foregone by choosing a course of action. It includes not only the money costs of a decision, but also the non-money costs, such as the value of your time. 4. How does a production possibility frontier (ppf) illustrate opportunity cost, specialization
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