Put this assignment in your own words. Chapter 1: Questions #11 & 12   11. The quality of education increases.· If we assume that better education transforms to better work skills, then productivi

Put this assignment in your own words.

Chapter 1: Questions #11 & 12

11. The quality of education increases.

· If we assume that better education transforms to better work skills, then productivity

should rise and the curve would shift outward.

a.       The number of unemployed workers increases.

·The location of the curve should not be affected. However, production would move

inward, away from the curve.

b.      A new technique improves the efficiency of extracting copper from ore

· More production is possible with existing resources, so the curve should shift outward.

c.       A devastating earthquake destroys numerous production facilities.

· With the destruction of resources, such as capital, the curve should shift inward.

12. The production possibilities curve explains that an individual nation is limited to the combinations of output indicated by its production possibilities curve. International specialization means directing domestic resources to output, which a nation is highly efficient at producing. The exchange of these goods for goods produced abroad is the process of international trade. Specialization and trade have the same effect as having more and better resources or discovering improved production techniques. The output gains from greater international specialization and trade are the comparable

of economic growth.

Chapter 1, Appendix Question

1. Graphs can be used to illustrate the relationship between multiple sets of data. An inverse

relationship is when the two variables change in opposite directions. The line is downward

sloping. A direct relationship is when the two variables change in the same direction. The line is

upward sloping.

Chapter 2: Questions #1 & 7, Problem #1

1.      Contrast how a market system and a command economy try to cope with economic scarcity.

· With a market system, it allows for the private ownership of resources and coordinates

economic movement through market prices. Most individuals act of their own will and interest

and look to get most satisfaction or profit through their own decisions regarding consumption or

production. Resources are supplied and goods and services are produced by whoever is willing

to do so. The result is competition and widely dispersed economic power. The command

economy is characterized by public ownership of nearly all property resources and economic

decisions are made through central planning. The planning board, appointed by the government

determines production goals for each enterprise. The division of output between capital and

consumer goods are centrally decided based on the board’s long-term priorities.

7. The expectation of economic profits attracted many firms into the “dot-com” industries.

Nonetheless, because of a lack of information and a market unable to sustain so many firms,

many failed to understand even a normal profit and failed. Although, many of the early dot-

coms were not earning economic profits, but their shareholders were reaping huge windfalls

from the stock market speculation. When these new firms found that they could not profitably

produce in this industry, they dropped out and the industry declined. The problem was not so

much one of consumer independence consumers demonstrated an interest in these services.

Because of the heavy competition with many firms trying to launch themselves in the market led

to prices that were insufficient to cover economic costs.