How can the concepts of opportunity costs, scarcity and choice be illustrated by the production possibilities curve?
What will be an ideal response?
The concept of opportunity cost is illustrated by movements along the production possibilities curve, meaning that producing more of one good necessarily means less production of another good. Scarcity represents a point on the PPC, but being unable to reach points beyond the PPC due to limited resources. Choice is represented by the actual point chosen on the PPC from all the possible production points on the PPC.
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Assume that a single insurance plan applies to 2,000 low-risk people and 1,000 high-risk people opting for insurance coverage. If the average claim submitted by low-risk people is $100 while that submitted by high-risk people was $1,000 . the insurer would break even by setting a premium of:
a. $250. b. $400. c. $200. d. $500.
The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50 . Each tree sells for a price of $65 . The Carolina Christmas Tree Corporation's total revenues are
a. $7,500. b. $25,000. c. $32,500. d. $67,500.
The share of GDP taken by taxes is considerably higher in the United States than in other countries.
Answer the following statement true (T) or false (F)
If the government saved during an economic boom by increasing taxes or decreasing spending, this would be:
A. contractionary fiscal policy. B. expansionary monetary policy. C. expansionary fiscal policy. D. contractionary monetary policy.