Chapter 1

Scarcity and Choice

By the end of this chapter you will be able to:

1. Identify the three fundamental economic questions.

2. Explain why a production possibility frontier has a negative slope and why that slope depicts the concept of opportunity cost.

3. Interpret what is depicted by a production possibility frontier.

4. Explain why increasing opportunity costs occur in the real world and how this relates to the production possibility frontier diagram.

5. Use the production possibility frontier to identify how economic growth might occur.

6. Distinguish between productive efficiency and allocative efficiency.

7. Distinguish between absolute advantage and comparative advantage.

8. Use comparative advantage to explain the theory that ...

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