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5 cards from this section. Quick, good the night before a test.
What does the basic economic question "what to produce?" ask?
It is about priorities and amounts, not methods or beneficiaries.
Define opportunity cost and give one example.
Ask what was given up, not what was gained.
An economy moves from 90 food and 10 machines to 70 food and 20 machines. What is the opportunity cost of each extra machine?
Divide the total food given up by the number of extra machines.
In a market economy, what mainly decides what is produced?
Think about who spends the money in a market.
A state government has funds for either a new hospital or a new highway. Use the ideas of opportunity cost, merit goods and stakeholders to recommend which to build.
State the opportunity cost of each option, then decide which need is more urgent and who benefits.
Country X uses 30 per cent of its resources to make capital goods; Country Y uses only 10 per cent and the rest for consumer goods. Explain how their production possibilities are likely to change over the next ten years, and one argument for Country Y's choice.
Capital goods today increase what can be produced tomorrow.
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