ECN 211 ASU EXAMS SCRIPT UPDATED
QUESTIONS AND ANSWERS SURE A+
✔✔Distinguish positive and normative economics. - ✔✔The end of Chapter 1 addresses
the difference between positive and normative economics. Positive economics is an
analysis that is limited to statements that are verifiable. Normative economics can be
identified by the use of the word should. Other words that provide a flag that a
normative statement, rather than a positive statement, is being made are good, bad,
best, desirable, undesirable, better, and worse.
In Chapter 2, you will study scarcity and the trade-offs that are made due to limited
resources.
✔✔Evaluate whether even affluent people face the problem of scarcity. - ✔✔If you stop
and think about it, things such as time, clean air, and sleep are limited. The idea of
scarcity is fundamental to the study of economics. Scarcity exists in all societies and at
all income levels because human wants exceed what can be produced with the limited
resources and time that nature makes available. This, in turn, forces people to decide
what and how much to consume.
✔✔Understand why economics considers individuals' wants but not their needs. -
✔✔Needs are not objectively definable. Perhaps the best way to view a need is as an
absolute necessity required to stay alive, such as food or water. Wants refer to desired
, goods and are unlimited. Therefore, in studying economics, an individual's wants are
taken into consideration, rather than needs.
✔✔Explain why the scarcity problem induces people to consider opportunity costs. -
✔✔Scarcity of resources requires choices be made. For example: Should you go to the
movie or study for your economics class for two hours? If you choose one, you cannot
also do the other due to the limited resource of time. When one choice is made, another
is given up. This brings you to opportunity cost, which is the highest valued, next-best
alternative that must be sacrificed for the choice that was made. In economics, cost is
always a forgone opportunity. Marginal benefit and marginal cost, which look at the
incremental cost (benefit) associated with one additional unit, help a consumer to make
choices.
The production possibilities curve (PPC) is a useful economic tool for understanding
trade-offs between wants. This tool helps to determine whether an economy is utilizing
all of its resources and is operating efficiently, and how overall growth may be
accomplished. An economy that operates inside the PPC is suffering from inefficiency. It
is not feasible for an economy to reach a point outside of the PPC since any point on
the PPC represents full efficiency.
✔✔Discuss why obtaining increasing increments of any particular good typically entails
giving up more and more units of other goods. - ✔✔As choices are made, you know that
an opportunity cost applies to giving up the next best thing. This brings you to the world
of trade-offs. Whenever you engage in any activity by using any resource, you are
trading off the use of that resource for one or more alternative uses. For example,
instead of going to one movie, you spend the whole day at a film festival. In this case,
you give up more units of studying for your economic class. Therefore, the cost of fun at
the film festival is a lower economics grade.
✔✔Explain why society faces a trade-off between consumption goods and capital
goods. - ✔✔Keep in mind there is also a trade-off between the present and the future.
When a decision is made to direct resources towards capital goods (such as improved
technology), a lesser amount of goods can be consumed in the present. However, the
investment in capital goods will lead to a greater output in consumption goods in the
future.
✔✔Distinguish absolute and comparative advantage. - ✔✔An economy that specializes
in, or produces, what it can do most efficiently due to its natural resources makes
production decisions based on its comparative and absolute advantage.
Understanding the relationship between specialization and comparative advantage is
essential because it forms the basis for exchange. If each person, region, and country
specializes in producing the things that they can produce most efficiently, it is possible
to increase output without increasing the total amount of resources. Higher incomes and
living standards result from specialization and trade based on comparative advantage.
QUESTIONS AND ANSWERS SURE A+
✔✔Distinguish positive and normative economics. - ✔✔The end of Chapter 1 addresses
the difference between positive and normative economics. Positive economics is an
analysis that is limited to statements that are verifiable. Normative economics can be
identified by the use of the word should. Other words that provide a flag that a
normative statement, rather than a positive statement, is being made are good, bad,
best, desirable, undesirable, better, and worse.
In Chapter 2, you will study scarcity and the trade-offs that are made due to limited
resources.
✔✔Evaluate whether even affluent people face the problem of scarcity. - ✔✔If you stop
and think about it, things such as time, clean air, and sleep are limited. The idea of
scarcity is fundamental to the study of economics. Scarcity exists in all societies and at
all income levels because human wants exceed what can be produced with the limited
resources and time that nature makes available. This, in turn, forces people to decide
what and how much to consume.
✔✔Understand why economics considers individuals' wants but not their needs. -
✔✔Needs are not objectively definable. Perhaps the best way to view a need is as an
absolute necessity required to stay alive, such as food or water. Wants refer to desired
, goods and are unlimited. Therefore, in studying economics, an individual's wants are
taken into consideration, rather than needs.
✔✔Explain why the scarcity problem induces people to consider opportunity costs. -
✔✔Scarcity of resources requires choices be made. For example: Should you go to the
movie or study for your economics class for two hours? If you choose one, you cannot
also do the other due to the limited resource of time. When one choice is made, another
is given up. This brings you to opportunity cost, which is the highest valued, next-best
alternative that must be sacrificed for the choice that was made. In economics, cost is
always a forgone opportunity. Marginal benefit and marginal cost, which look at the
incremental cost (benefit) associated with one additional unit, help a consumer to make
choices.
The production possibilities curve (PPC) is a useful economic tool for understanding
trade-offs between wants. This tool helps to determine whether an economy is utilizing
all of its resources and is operating efficiently, and how overall growth may be
accomplished. An economy that operates inside the PPC is suffering from inefficiency. It
is not feasible for an economy to reach a point outside of the PPC since any point on
the PPC represents full efficiency.
✔✔Discuss why obtaining increasing increments of any particular good typically entails
giving up more and more units of other goods. - ✔✔As choices are made, you know that
an opportunity cost applies to giving up the next best thing. This brings you to the world
of trade-offs. Whenever you engage in any activity by using any resource, you are
trading off the use of that resource for one or more alternative uses. For example,
instead of going to one movie, you spend the whole day at a film festival. In this case,
you give up more units of studying for your economic class. Therefore, the cost of fun at
the film festival is a lower economics grade.
✔✔Explain why society faces a trade-off between consumption goods and capital
goods. - ✔✔Keep in mind there is also a trade-off between the present and the future.
When a decision is made to direct resources towards capital goods (such as improved
technology), a lesser amount of goods can be consumed in the present. However, the
investment in capital goods will lead to a greater output in consumption goods in the
future.
✔✔Distinguish absolute and comparative advantage. - ✔✔An economy that specializes
in, or produces, what it can do most efficiently due to its natural resources makes
production decisions based on its comparative and absolute advantage.
Understanding the relationship between specialization and comparative advantage is
essential because it forms the basis for exchange. If each person, region, and country
specializes in producing the things that they can produce most efficiently, it is possible
to increase output without increasing the total amount of resources. Higher incomes and
living standards result from specialization and trade based on comparative advantage.
