Chapter2.+Thinking+Like+An+Ecnomist



Question1. When an economy produces a combination of goods that lies on the production possibilities fronteir:

a. resources are being used fully and efficiently b. prices are constant c. opportunity cost is constant.

Answer: a.

Question 2. If technology improves, all else constant:

a. the economy must have some idle resources b. goods and services will increase in price c. the production possibilities frontier will shift outward

Answer: c.

Summary:

In this chapter, we learn how to think like an economist. Yet the most important thing is the production possibilities frontier. This shows the maximum of production the firms can produce. If it is inside the curve, this is when firms inefficiently produce their products. If it is on the curve, this is when firms efficiently produce their products. Outside of the curve is what we call "impossible" yet by technology advances or trade, this is possible.