Define opportunity cost and give an example to demonstrate your understanding of the concept.

2. Briefly explain the cost-benefit approach to decision making. Give an example of the practical use of

this approach.

3. Explain why p-p curves are more likely to be concave than linear.

4. State the law of increasing opportunity cost.

5. Define:

a) Productive efficiency

b) Productive inefficiency

6. How can economic growth be illustrated on a p-p diagram?

7. Explain why a fall in prices will not shift an economy's p-p curve.

8. Explain why p-p curves are unlikely to shift in or out in a parallel manner.

9. What are the fundamental microeconomic questions?

10.Identify four important macroeconomic questions or issues and explain briefly why each is

important.

11.Why would ordinary Canadians be interested in the cost of living?

CHAPTER 2

The Economic Problem: Scarcity and Choice

I Define the terms and concepts listed:

Opportunity cost Unemployment

Cost-benefit approach Inflation

Production possibility (p-p) schedule Cost of living

Production possibility (p-p) curve Circular flow

Law of increasing opportunity cost Households

Productive efficiency Firms

Productive inefficiency Market

Free lunch Factor market

Economic growth Product market

Aggregate output Real flows

Business cycles Money flows