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Homework answers / question archive / Chapter 2

Chapter 2

Economics

Chapter 2.I

1)Does the richest person in the world face the problem of? scarcity?
 

 

  1. Scarcity
     

                                                                                                                              

  1. The existence of scarcity requires
     
  2. Any activity that results in the conversion of resources into products that can be used in consumption is called
     

 

  1. Factors of production include
     

                                                                                                                                          

  1. Julie goes to a cooking academy to become a chef. This is an example of
     
  2. Economic goods are
     

 

  1. Which of the following is not a factor of production
     
  2. Why do economists avoid making the distinction between wants and needs??          
  3. Many state governments claim a shortage of funds because there are? "unmet needs." This claim
     
  4. Each individual must make choices because
     
  5. When an individual proclaims the need for a new? car, the person typically means
     
  6. Scarcity is the same as a shortage.
     

 

  1. Entrepreneurship is the component of human resources that performs the functions of? organizing, managing, and assembling the other factors of production to create and operate business ventures.
     

 

  1. The factor of production that consists of factories and equipment used in? production, as well as improvements to natural? resources, is called
     

 

  1. Economic goods are goods for which the quantity demanded exceeds the quantity supplied at a zero price.
     

 

  1. People have? ________ wants and? ________ resources to deal with those wants.
     

 

  1. ___ is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available.
     
  2. We use scarce? resources, such? as__________, __________,? __________ and? __________ capital, and? __________, to produce economic goods - goods that are desired but are not directly obtainable from nature to the extent demanded or desired at a zero price.
     

 

  1. ____ are unlimited. They include all material desires and all nonmaterial? desires, such as? love, affection,? power, and prestige.
     

 

  1. The concept of ___ is difficult to define objectively for every person.? Consequently, we simply consider every? person's wants to be unlimited. In a world of ?scarcity, satisfaction of one want necessarily means nonsatisfaction of one or more other wants
     

 

Chapter 2.2

  1. Opportunity cost is best defined as ___ alternative(s) that must be sacrificed to obtain something or to satisfy a want.
     
  2. Which of the following would least likely? be, for the typical? student, the opportunity cost of attending a class at? 11:00 a.m.?
     

 

  1. The opportunity cost of attending a class at? 11:00 a.m. will likely differ from the opportunity cost of attending a class at? 8:00 a.m. because
     
  2. If you receive a free ticket to a? concert, what, if? anything, is your opportunity cost of attending the concert?
     
  3. If miserable weather on the night of the concert requires you to leave much earlier for the concert hall and greatly extends the time it takes to get home? afterward, the opportunity cost of attending the concert _____.
     

 

  1. You and a friend decide to spend? $100 each on concert tickets. Each of you alternatively could have spent the? $100 to purchase a? textbook, a meal at a highly rated local? restaurant, or several internet movie downloads. As you are on the way to the? concert, your friend tells you that if she had not bought the concert? ticket, she would have opted for a restaurant? meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are
     
  2. After the? concert, for which you and your friend paid? $100 each to get a? ticket, is over and you and your friend are traveling? home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to? study, to watch a sporting event on? TV, or to get some extra sleep. Your friend decides that if she had not spent four hours attending the? concert, she would have chosen to? study, and you reply that you otherwise would have watched the televised sporting event. The relevant opportunity costs for you and your friend for allocating four hours to attending the concert are

 

  1. Recently, a woman named Mary Krawiec attended an auction in? Troy, New York. At the? auction, a bank was seeking to sell a foreclosed? property: a large Victorian house suffering from years of neglect in a neighborhood in which many properties had been on the market for years yet remained unsold. Her? $10 offer was the highest bid in the? auction, and she handed over a? $10 bill for a title to ownership. Once she acquired the? house, however, she became responsible for all taxes on the property amounting to ?$4,000 and for an overdue water bill of ?$2,000. In? addition, to make the house? habitable, she and her husband devoted months of time and unpaid labor to renovating the property. In the? process, they incurred explicit expenses totaling ?$60,242.
     
  2. Opportunity cost
     
  3. A production possibilities curve represents
     
  4. Every choice involves giving up an opportunity to produce or consume something else.
     
  5. Opportunity cost refers to
     
  6. Engaging in any activity using any? resource, even? time, involves trading off the use of that resource for one or more alternative uses.
     
  7. With respect to your grades in your accounting and economics? classes, a? one-to-one trade-off means that the opportunity cost of receiving one grade higher in accounting? (for example, improving from a D to a? C) is one grade lower in economics? (falling from a B to a? C).
     
  8. A production possibilities curve
     

 

  1. Scarcity requires us to choose. Whenever we? choose, we lose the ___ valued alternative.
     

 

  1. Cost is always a forgone____
     

 

  1. Another way to look at opportunity cost is the? trade-off that occurs when one activity is undertaken rather than the ___ alternative activity.
    ­
  2. A ___ curve graphically shows the? trade-off that occurs when more of one output is obtained at the sacrifice of another. This curve is a graphical representation? of, among other? things, opportunity cost.
     

 

  1. The bank was willing to sell the house at auction to Ms. Krawiec for only? $10 because if the bank paid to renovate the? property, paid the back? taxes, and paid the overdue water? bill
     

Chapter 2.3

 

  1. Like physical? capital, human capital produced in the present can be applied to the production of future goods and services. Consider the table shown to the? right, and suppose that the? nation's residents are trying to choose between combination C and combination F. Other things being? equal, will the future production possibilities curve for this nation be located farther outward if the nation chooses combination F instead of combination? C?
     
  2. A point inside the PPC means that
     
  3. Which of the following statements about production possibilities curves is not? true?
     
  4. A production possibilities curve that is bowed outward? (from the? origin) represents the concept that
     
  5. For a nation that only produces two? goods, the maximum amounts of each of those goods that can be produced are represented by points on a production possibilities curve that are? half-way between the vertical and horizontal axes.
     
  6. All of the following are assumptions underlying the production possibilities curve except
     
  7. During the time period assumed by a production possibilities? curve, it is? ________ to be at a point outside the curve and? ________ to be at a point beneath the curve.
     

                

  1. An economy is productively efficient whenever it is producing the maximum output with given technology and resources.
     
  2. An? economy's production is efficient
     

 

  1. The law of increasing additional cost shows that the opportunity cost of additional units of a good generally increases as people attempt to produce more units of that good.
     
  2. The law of increasing additional cost is represented by a? ________ production possibilities curve.

 

  1. Trade-offs are represented graphically by a ______ curve showing the maximum quantity of one good or service that can be? produced, given a specific quantity of? another, from a given set of resources over a specified period of? time-for example, one year.
     

 

  1. A production possibilities curve is drawn with the quantity and quality of all resources ___ over the time period under study.
     

 

  1. Points ____ the production possibilities curve are unattainable. Points ___ are attainable but represent an inefficient use or underuse of available resources.
     
  2. Because many resources are better suited for certain productive tasks than for? others, the production possibilities curve is bowed ___ reflecting the law of increasing additional cost
     

 

  1. On a graph that shows the? trade-off between the production of two? goods, the? trade-offs occur outside the production possibilities curve.
     

Chapter 2.4

 

  1. Suppose that in the figure to the? right, a nation currently has sufficient resources to produce combinations located along only the innermost production possibilities?curve, labeled A. In? addition, suppose that the? nation's residents have determined that smartphones function mainly as consumption goods while tablet devices function primarily as capital goods. If the nation produces no additional tablets this? year, will the? intermediate-shifted PPC resulting from minimal economic? growth, labeled? B, or the? farthest-shifted PPC caused by more significant economic? growth, labeled? C, be more likely to apply next? year? If the nation produces no additional tablets this? year, the PPC that will be more likely to apply next year will be
     

                                                                                                                                                                    

  1. Suppose that in the figure to the? right, a nation currently has sufficient resources to produce combinations located along only the innermost production possibilities?curve, labeled A. In? addition, suppose that the? nation's residents have determined that smartphones function mainly as consumption goods while tablet devices function primarily as capital goods. If the nation produces no additional smartphones this? year, will the? intermediate-shifted PPC resulting from minimal economic?growth, labeled? B, or the? farthest-shifted PPC caused by more significant economic? growth, labeled? C, be more likely to apply next? year? If the nation produces no additional smartphones this? year, the PPC that will be more likely to apply next year will be
     
  2. The production possibilities curve will shift outward? (upward, and? or, to the? right) when
     
  3. Economic growth implies
     

 

  1. Greater economic growth is shown as
     
  2. If a country devotes more resources toward the production of capital goods and less toward consumer goods then
     

 

  1. You are investing your resources in a college education because
     
  2. Suppose the economy depicted in the accompanying graph was initially at point 'S?'. In order to foster a more rapid rate of? growth, the economy should
     
  3. Whenever a society forgoes current consumption in order to invest in capital? goods,
     
  4. If economic growth occurs in a? nation, this is represented by
     

 

  1. Whenever we use productive resources to make capital? goods, we are automatically increasing current consumption.
     
  2. The greater the amount of productive resources we use to produce capital goods? today,
     
  3. _____ goods are goods that will later be used to produce consumer goods.
     

 

  1. A? trade-off is involved between current consumption and capital goods? or, alternatively, between current consumption and future consumption. The ___ we invest in capital goods? today, the greater the amount of consumer goods we can produce in the future and the ___ the amount of consumer goods we can produce today
     

Chapter 2.5
 

  1. You can? wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can? wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by? ____ and in meal preparation by? ____
     

 

  1. The comparative advantage in laundry is held by? ____ and in meal preparation by? ____
     
  2. A professor with a Ph.D. in Economics can write a short essay in economics in 1 hour and can mow the lawn in 2 hours. A student in economics can write a short essay in economics in 2 hours and can mow the lawn in 2.5 hours. Which of the following statements is? true?
     
  3. Country A and country B produce the same consumption goods and capital goods and currently have identical production possibilities curves. They also have the same resources at? present, and they have access to the same technology. At? present, does either country have a comparative advantage in producing capital? goods?
     
  4. Currently, country A has chosen to produce more consumption? goods, compared with country B. Other things being? equal, which country will experience the larger outward shift of its PPC during the next? year?
     
  5. The productivity gains achieved by specialization are due to
     

 

  1. What is the difference between absolute advantage and comparative? advantage?
     

 

  1. Steve can? wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. His roommate Mike can? wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by
     
  2. The comparative advantage in meal preparation is held by
     
  3. Phoebe has an absolute advantage in typesetting and Joey has an absolute advantage in making sandwiches. Assuming that the population consists only of Phoebe and Joey we know that
     
  4. The division of labor refers to
     
  5. The division of labor increases the output of society by
     
  6. The division of productive activities among persons and regions so that no one individual or region is totally? self-sufficient is known as
     
  7. When Adam? Smith's ten pin workers? specialized, they were able to increase the output of pins in a day from 200 to? 48,000. One reason for the increase in pin production was due to
     

 

  1. Comparative advantage is the ability to produce a good or service at a higher opportunity cost compared to other producers.
     
  2. Absolute advantage refers to the ability to produce more units of a good or service using a given quantity of labor or resource inputs.
     
  3. In determining how to allocate your? time,
     
  4. When people make? choices, they attempt to maximize benefits net of opportunity cost.
     
  5. Division of labor refers to the segregation of resources into different specific tasks.
     
  6. When nations specialize in an area of comparative advantage and then trade with the rest of the? world, the average standard of living in the world rises.
     

 

  1. With a given set of? resources, specialization results in ___ output. In other? words, there are gains to specialization in terms of greater material? well-being.
     

 

  1. Individuals and nations specialize in their areas of ____ advantage in order to reap the gains of specialization.
     

 

  1. Comparative advantages are found by determining which activities have the ___ opportunity -- that ?is, which activities yield the highest return for the time and resources used.
     

 

  1. A ___ of labor occurs when different workers are assigned different tasks.? Together, the workers produce a desired product.
     

 

 

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