Because resources are insufficient to (1) ____ all the things we want, we have to choose how best to use those resources. In deciding how to use our limited resources, certain (2) ____ are necessary.
The value of what we give up when resources are used to produce one thing rather than another is the opportunity cost of what is produced. In order to get the greatest (3) ____ from our limited resources, we should use then for the (4) ____ that best serve our needs. If we dont, then the opportunity costs of what we produce will be too high.
A production possibility frontier (PPF) shows the trade-off between two alternative uses of a resource.
The PPF shows the opportunity cost of producing more of one good by showing the amount
of the (5) ____ good that is (6) ____. Production possibility frontiers generally curve outward because of increasing opportunity costs incurred as more of one good is produced. Production possibility frontiers are economic (7) ____ helpful in analyzing the opportunity costs of trade-offs.
All economic systems must resolve three basic economic questions: what to produce; how to produce; for whom to produce. (8) ____ cannot efficiently be dealt with unless the economy
(9) ____ its resources to producing the goods and services most needed and desired. An economic system needs also to (10) ____ the most efficient production methods with the resources available. Finally, an economic system must determine who gets how much of what is produced.
1. A do B construct C produce D build
2. A advantages B trade-offs C cuts D trades
3. A benefits B changes C income D allowances
4. A effects B outputs C results D inputs
5. A selective B conventional C competitive D alternative
6. A satisfied B given away C abandoned D sacrificed
7. A tools B weapons C equipment D gadgets
8. A rarity B diversity C scarcity D variability
9. A donates B presents C allocates D surrenders
10. A utilize B exercise C operate D handle
XI. Tasks for thought.
1. A tribe living on a tropical island includes five workers whose time is devoted either to gathering coconuts or to collecting turtle eggs. Regardless of how many other workers are engaged in the same occupation, a worker may gather either 20 coconuts or 10 turtle eggs a day.
a) Draw the production possibility frontier for coconuts and turtle eggs.
b) Suppose that a new climbing technique is invented making the harvesting of coconuts easier. Each worker can now gather 28 coconuts a day. Draw the new production possibility frontier.
2. Figure I shows a societys production possibility frontier for cameras and watches.
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a) Identify each of the following combinations of the two goods as being either efficient, inefficient, or unattainable: 60 cameras and 200 watches;
60 watches and 80 cameras;
300 watches and 35 cameras;
300 watches and 40 cameras;
58 cameras and 250 watches.
b) Suppose the society is producing 300 watches and 40 cameras, but wishes to produce an additional 20 cameras. How much output of watches must be sacrificed to enable these extra cameras to be made?
Cameras
80
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60
40
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20
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100 200 300 400
Watches
3. Have a look at Figure II and associate each of the points (A, B, C, D) with one of the following statements:
a) A combination of goods which cannot be produced by society given its current availability of resources and state of technology.
b) The combination of goods produced by an economy with full employment which wishes to devote its resources mainly to the production of investment goods.
c) A combination of goods produced by an economy in recession.
d) The combination of goods produced by an economy with full employment which wishes to devote its resources mainly to the production of goods for consumption.
Producer goods
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* D
* C
* A
* B
0 Computer goods
