Question

How does scarcity affect the range of possible choices that 32. decision makers face? 2. It marrows the choice to a single option ble narrows the range of choices. C. It increases the possible methods for solving problems. it clarifies the choices by highlighting the best solutions lit simplifies the choices and therefore widens the range 33. An optimal decision is one that is selected based on an analysis of explicit costs but not implicit costs b.implicit costs but not explicit costs. c. both explicit costs and implicit costs. neither explicit costs or implicit costs Figure 3-7 0 50 75 x 34. What is the opportunity cost of moving from point B to point A in Figure 3-7? 20 units of 175 units of 35. All of the points inside a production possibilities frontier are all of the points outside the production possibilities frontier are efficient.net nahle unstable canattainable, efficient 36. If production involves increasing opportunity cost, then moving nearer the horizontal axis will increase the opportunity cost of the good that is shown on the horizontal axis b) the good that is shown on the vertical axis. both of the words shown on the axes. heither of the goods shown on the axes.

Answer 1

32. Answer (b): Scarcity narrows the range of choices. For example, without scarcity a consumer gets an unlimited combinations of goods to choose from, but with scarcity (in the form of his affordability or income), it has a subset of combinations of goods out of the unlimited choices. However, it does not force the consumer to choose only one combination (hence (a) is not correct). Other options are also not correct since (d) focuses on one choice which is not the case, (e) talks about widens the range which is not true. Even (c) is also not correct since solving method is not the basis of choices rather solving methods facilitates to numerically solve the optimization problem.

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33. Answer (c): An optimal decision is selected based on an analysis of both explicit costs and implicit costs. If implicit costs will not be taken into account, it may happen that some better opportunities are lost because implicit cost measures the opportunity costs.

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34. Answer (b): 50 units of X. At point A, 50 units of X and 80 units of Y are produced. Moving from B to A means that production of Y is increased to 100 and 0 units of X. This movement happens at the cost of 50 units of X (i.e., reduction of X from 50 to 0). Hence, the opportunity cost of additional 20 units of Y is 50 units of X.

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35. Answer (c): All the points inside a production possibilities frontier are attainable; all of the points outside the production possibilities frontier are unattainable. All the points on the frontier are efficient, all points below the frontier are attainable but inefficient where as all the points outside the frontier are not feasible or not attainable.

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36. Answer (b): If production involves increasing opportunity cost, then moving nearer the horizontal axis will increase the opportunity cost of the goods that is shown on the vertical axis. The principle of increasing opportunity cost means a concave frontier. When we move towards the horizontal axis, the slope of the frontier increases, i.e., the production of the goods on horizontal axis requires more and more of the goods on the vertical axis to be sacrifices. In other words, opportunity cost of the goods on vertical axis increases as we move towards the horizontal axis along the frontier.

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