Chapter 2: Production Possibilities, Opportunity Cost, and Economic
Growth
LEARNING OBJECTIVES
#1 - Define the three fundamental economic questions and opportunity cost.
Step 1Read the sections in your textbook titled “The Three Fundamental Economic Questions” and “Opportunity Cost.”
Step 2Listen to the “Ask the Instructor Video Clip” titled “Why Do Language Teachers Earn Less?” You will learn that opportunity cost applies to earnings differentials.
Step 3Read the EconNews article titled “It’s Getting Too Expensive to Put People in Jail.” This article describes the opportunity cost of fighting crime.
Step 4Read the EconDebate titled “Does Public Investment in Municipal Stadiums Pay Off?” This article describes how stadiums result in opportunity costs.
The Result After following these steps, you have learned to understand that all nations must answer three basic economic questions and give examples of opportunity cost.
#2 - Graphically express a production possibilities model and understand that it illustrates marginal analysis, opportunity cost, production efficiency, and inefficiency.
Step 1Read the sections in your textbook titled “Marginal Analysis,” “The Production Possibilities Curve,” and “The Law of Increasing Opportunity Costs.”
Step 2Watch the Graphing Workshop “See It!” tutorial titled “The Production Possibility.” Study how the production possibilities curve is applied to health care using marginal analysis and the law of increasing opportunity cost. Efficient and inefficient points are also explained in this exercise.
Step 3Listen to the “Ask the Instructor Video Clip” titled “Why Do Economists Emphasize Marginal Analysis?” You will learn that marginal analysis is important in career decisions or driving a car.
Step 4Read the EconNews article titled “The Federal Budget: What a Difference a Day Makes.” This article describes a production possibilities are relationship between national defense and domestic programs.
The ResultAfter following these steps, you have learned to define marginal analysis and apply this reasoning tool to the production possibilities curve model.
#3 - Use the production possibilities curve to understand economic growth.
Step 1Read the sections in your textbook titled “Source of Economic Growth” and “Present Investment and the Future Production Possibilities Curve.”
Step 2Read the Graphing Workshop “Grasp It!” exercise titled “Production Possibilities.” This exercise uses a slider bar to demonstrate economic growth based on the impact of technological change on the production possibilities curve for computers and cars.
Step 3Create a new graph at the Graphing Workshop “Try It!” exercise titled “Production Possibilities.” This exercise illustrates an outward shift in the production possibilities curve.
Step 4Play the “Causation Chains Game” titled “Economic Growth and Technology.”
Step 5Listen to the “Ask the Instructor Video Clip” titled “Do Economists and the General Public Attach Different Meanings to the Term Investment?” You will learn the economist’s definition of investment versus the everyday use of this term.
Step 6Read the Econ Debate article titled “Is There a New Economy?” This article describes the issues and background for the “new economy.”
The ResultAfter following these steps, you have learned to explain economic growth in terms of an outward shift in the production possibilities curve.
Ch2-1