Chapter 2 exam scarcity and the world of trade essay

Part Two Socialist, Marxist and Communist Indoctrination School kids are being prepared for a socialist world government under the United Nationsto which most public school teachers would not object. The kids are being taught that one culture is just as good as another. They are being taught that it isn't fair for the United States to be the world's only superpower.

Chapter 2 exam scarcity and the world of trade essay

The basic assumption of Economics is that all decision-making units make rational choices. Rational choices maximize the well-being of economic agents. Rational choices are made by different decision-making units to maximize different objectives.

To obtain the highest level of satisfaction, a rational decision must be made. This decision has to be an optimal one. Assuming rational behaviour on the part of decision-making units, this optimal choice must be the one that chooses the most desirable alternative among the possibilities that the available resources permit.

These decision-making units include household, firms and the government. The figure above shows a PPC production possibility curve. A production possibility curve is a graph that shows the maximum attainable combinations of output that can be produced in an economy within a specific period of time, when all the available resources are fully and efficiently employed, at a given state of technology.

The PPC is a economic framework that can be used to illustrate concepts of scarcity, choices and opportunity costs. All the points on the PPC represent productive efficient levels of production. Scarcity is illustrated, therefore, by the unattainable combinations outside the PPC as well as the fact that society has to choose between combinations of the two goods as resources cannot be used to produce all at the same time, and the combinations of goods such as amount od capital and consumer goods in the case of the PPC above the economy eventually chooses depends on its priorities.

The downward negative sloping gradient of the PPC also illustrates the concept of opportunity cost. To choose to have more of one good means having to give up some of the other good, given that the limited resources have been fully and efficiently employed increased output of one product in turn causes the out put of the other product to fall due to limited resources and scarcity Economic agents employ several analytical tools to make rational choices.

They take into account the opportunity costs and often make decisions based on the marginalist principle.

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Every time a choice is made, an opportunity cost is incurred. Opportunity cost refers to the real cost in terms of the next best alternative that has to be forgone, and it arises due to the fact that the resources available to meet the unlimited wants are limited so that not all of the wants can be fully satisfied.

Chapter 2 exam scarcity and the world of trade essay

An economic agent, therefore, has to make a decision based on his current priorities and sacrifice the next best alternative. Economic choices are made at the margin. The margin is the edge or border where we must decide whether to take one more step or to produce one more unit of a particular good or whether to use one more unit of a particular resource.

Rational decisions are made at the margin involve weighing up marginal costs and marginal benefits. Generally, economic agents are compelled to continue producing a particular type of good until the marginal cost is equals to the marginal benefit ie the production of one additional unit would mean that the marginal costs would outweigh the benefits.

In conclusion, due to the fact that resources are high limited, all societies face the problem of scarcity and hence have to make decisions like a household does. A society has to decide what and how much to produce, how to produce and for whom to produce.

Firstly, the society must decide what goods it is going to produce and hence what not to produce. Such choices usually take the form of more of one thing and less of the other i.

Secondly, most goods can be produced by a variety of methods, and a society must decide on the methods of production to be adopted. Thirdly, the total output needs to be distributed among members of the society, and the society therefore needs to consider how it can distribute its goods.

Therefore, we can conclusively assert that the basic economic problem of scarcity compels economic agents to make rational decisions such as choosing the composition of total output to maximize total profit and to comply with their current priorities.

How to cite this page Choose cite format:CHAPTER 2 Exam – Scarcity and the World of Trade—offs. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

CHAPTER 2 Exam - Scarcity and the World of Trade—offs MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) As a student of economics, when you speak of scarcity, you are referring to A) the ability of society to employ all of its resources.

B) the ability of society to consume all that it 85%(20). Chapter 1: Ten Principles of Economics Principles of Economics, 8th Edition N. Gregory Mankiw 1. Scarcity is the limited nature of society’s resources. P. 4 2. Economics is a way of viewing the world.

B. Principle #1: People face trade offs 1. This bar-code number lets you verify that you're getting exactly the right version or edition of a book.

The digit and digit formats both work.

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We have over college courses that prepare you to earn credit by exam that is accepted by over 1, colleges and universities. Economic Scarcity and the Function Chapter Practice Exams.

Chapter 2 Study Guide Essay. Chapter study Guide Vocab Moluccas A group of islands in eastern Indonesia; was the center of spice trade during the ’s and ’s Cartographer Mapmaker Circumnavigate To completely travel around the world Monopoly Where a country, company, person, etc.

has absolute control over an aspect in business.

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