2. Explain and evaluate: “If resources were infinitely abundant in relation to the demand for them, the economizing problem would dissolve in a sea of affluence.”

2. Differentiate between allocative efficiency and productive efficiency.

3.  The production possibilities curve below show the hypothetical relationship between the production of food and clothing in an economy.

1. 1. What is the marginal opportunity cost of producing the second unit of clothing?
   2. What is the total opportunity cost of producing the second unit of clothing?
   3. What is the marginal opportunity cost of producing the third unit of clothing?
   4. What is the total opportunity cost of producing the third unit of clothing?

Combination                           Food                                  Clothing

5. What is the economic rationale for the law of increasing costs?

6. What do economists mean when they state that investment is spending on “goods for the future”?

7. Describe the adjustments in the production possibilities curves in each of the following situations for the U.S. economy.
   1. the economy moves from full employment into a deep recession
   2. the economy makes great strides in eliminating discrimination
   3. the end of the cold war leads to cuts in military spending
   4. Congress significantly increases government spending for health and education

8. Explain the term “laissez faire capitalism.”