CHAPTER 1 Limits, Alternatives, and Choices |17 2. Cite three examples of recent decisions that you made in which 9. Explain the typical shapes of marginal-benefit and marginal-cost you, at least implicitly, weighed marginal cost and marginal curves. How are these curves used to determine the optimal benefit. LO1.1 allocation of resources to a particular product? If current output 3. What is "utility" and how does it relate to purposeful behav- is such that marginal cost exceeds marginal benefit, should ior? LO1.1 more or fewer resources be allocated to this product? 4. What are the key elements of the scientific method, and how Explain. LO1.6 does this method relate to economic principles and laws? LO1.2 10. Suppose that, on the basis of a nation's production possibilities 5. Make (a) a positive economic statement of your choice, and curve, an economy must sacrifice 10,000 pizzas domestically to then (b) a normative economic statement relating to your first get the 1 additional industrial robot it desires, but it can get the statement. LO1.3 robot from another country in exchange for 9,000 pizzas. Relate 6. How does the slope of a budget line illustrate opportunity costs this information to the following statement: "Through interna- and trade-offs? How does a budget line illustrate scarcity and tional specialization and trade, a nation can reduce its opportu the effect of limited incomes? LO1.4 ity cost of obtaining goods and thus move outside its 7. What are economic resources? What categories do economists production possibilities curve." LO1.7 use to classify them? Why are resources also called factors of 11. LAST WORD Starbucks has $1 billion to invest. It can either production? Why are they called inputs? LO1.5 purchase a rival coffee shop chain or build additional Starbucks 8. Why is money not considered to be a capital resource in eco- shops. If Starbucks chooses to purchase the rival chain, what nomics? Why is entrepreneurial ability considered a category of does that say about the relative profitability of purchasing and economic resource, distinct from labor? What roles do entrepre- owning the rival's existing shops versus building additional Star- neurs play in the economy? LO1.5 bucks shops? Explain. Review Questions Aw connect 1. Match each term with the correct definition. LO1.1 b. Your budget remains $100, and the price of books remains economics $25, but the price of movie tickets rises to $20. opportunity cost c. Your budget remains $100, and the price of movie tickets $10 of a book falls t o $15consumer goods economic perspective aggregate capital goods scarcity positive economics opportunity cost entrepreneurial ability normative economics utility entrepreneurs economizing problem marginal analysis budget line factors of production scientific method economic resources production possibilities curve economic principle land law of increasing opportunity costs other-things-equal assumption labor economic growth microeconomics capital Discussion Questions connect 1. What is an opportunity cost? How does the idea relate to the block in the heart of New York City for a surface parking lot or definition of economics? Which of the following decisions allocating a square block at the edge of a typical suburb for such would entail the greater opportunity cost: allocating a square a lot? Explain. LO