Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 3, Problem 13P
To determine
The production of new schools and space stations is to be determined.
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Imagine a society that produces Capital goods and consumer goods.
Draw a production possibilities frontier for capital and consumer goods. Explain why it most likely has a bowed-out shape.
Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient.
Imagine that the society has two political parties, party A (who wants capital goods) and the party B (who want a consumer goods). Show a point on your production possibilities frontier that the part A might choose and a point the party B might choose.
Imagine that our progressive neighboring country reduces the size of its consumer goods. As a result, both the Party A and B reduce their desired production of consumer goods by the same amount. Which party would get the bigger “technology dividend,” measured by the increase in capital production? Explain.
What is economics?
A social science that teaches one how to cope with scarcity.
A discipline that quantifies the values of assets.
A quantitative science to analyze business cycles.
A science that teaches firms and individuals how to maximize profits.
Most economists believe the scarcity of resources will persist. Why?
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- Draw a production possibilities curve showing the number of apples and pears that one person can pick in a given time period. Show efficient, inefficient, and impossible levels of output. Explain why a combination of apples and pears (i.e. a level of output at a middle point along the curve) gives you more fruit that if you had picked only apples. The highest quality cricket bats, used by Test cricketers, sell for over $1,000AUD. They are made from a special type of willow tree grown specifically for that purpose. Similar bats, made from cheaper willow, sell for less than $200. Suppose a plant disease destroys half of the world’s high quality willow trees. The stock of cheaper willow trees is unaffected. (a) Explain how the market for high quality cricket bats might be affected by this change. (b) Explain how the market for cricket bats made from cheaper willow might be affected by the change in the market for high quality bats.arrow_forwardAny point on a country's production possibilities curve represents a combination of two goods that an economy will never be able to produce. can produce using all available resources and technology. can produce using some portion, but not all, of its resources and technology. may be able to produce in the future with more resources and/or technology.arrow_forwardHow can an economy increase the production of one good without reducing the production of another? Identify at least three factors that contribute to this increase and explain how they contribute to the increase.arrow_forward
- Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce. Explain why scarcity exists in this economy. Use the data as evidence of your reasoning. What is the maximum quantity of guns that can be produced? What is the maximum quantity of butter than can be produced? Draw the nation’s production possibility curve. What is the opportunity cost of guns in this nation? Explain why the nation can’t produce both 3 guns and 4 butters. Explain why the nation shouldn’t produce both 1 gun and 2 butters.arrow_forwardtrue or false Economic models must mirror reality or they are of no value. When economists make normative statements, they are more likely to be acting as scientists. If a country's worker can produce 5 hamburgers per hour and 10 bags of fries per hour, then absent trade with other countries,the price for 1 bag of fries is 2 hamburgers. If trade benefits one country, it's trading partner must be worse off due to the price of trade. If an advanced country has an absolute advantage in the production of everything(relative to certain less developed countries), the advanced country will benefit if it eliminates trade with less developed countries and becomes self sufficient.arrow_forwardScarcity limits the volume of goods that an economic system can produce but does not limit the production of services. True or falsearrow_forward
- The United States is one of the world's wealthiest countries. Think of a recent case in which the decisions of the U.S. government were severely constrained by scarcity. Describe the trade-offs that were involved. What were the opportunity costs of the decisions that were actually made?arrow_forwardThe core of most economics debates comes back to the three core questions that we are trying to answer (what to produce, how to produce and for whom to produce). Do you favor a laissez faire approach or government intervention? Why? How does the government approach impact economic growth in the long run?arrow_forwardThe attainable production points on a production possibilities curve are?arrow_forward
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