ECO 2023 Final || with 100% Correct Answers.

3 big economic questions correct answers 1. What: what and how much is produced? 2. How: how are goods and services produced? 3. Who: who will get the goods and services? 3 approaches to answering 3 big questions correct answers 1.Tradition approach: do what we've always done. 2. Command approach: government planners answer the questions. 3. Market-based approach: let prices, property rights, and markets answer the questions. (works best because it aligns the self-interest with the social interest) Production Possibilites Frontier (PPF) correct answers Shows the maximum feasible combinations of goods a society can produce, given current resources and technology Points within the PPF correct answers attainable, but inefficient Points outside the PPF correct answers unattainable Points on the PPF correct answers Attainable, and production efficient. Only one combination is allocatively efficient. Why is PPF bowed outward? correct answers Because of the law of increasing opportunity cost. Law of Increasing Opportunity Cost correct answers the opportunity cost of producing a good increases as more of it is produced. Opportunity Cost correct answers the next best alternative foregone (what is given up in exchange for increasing something else) Opportunity cost is always in terms of the other good correct answers If a factory produces burgers and fries, the opportunity cost of producing more burgers is producing less fries. Law of Demand correct answers states that quantity demanded falls as price rises. Law of Supply correct answers states that quantity supplied rises as price rises. Increase in income for a normal good correct answers Demand curve shifts right Decrease in income for an inferior good correct answers Demand curve shifts right Increase in the price of a substitute correct answers Demand curve shifts right Decrease in the price of a complement correct answers Demand curve shifts right Favorable changes in preferences correct answers Demand curve shifts right