Chapter 1: Page 20; Questions - 4, 7, 9, 10, 11
4) What are the key elements of the scientific method and how does this method relate to economic principles and laws? The key elements of the scientific method are the observation of real world behavior and outcomes. Based on those observations, formulating a possible explanation of cause and effect which is a hypothesis. Next, testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis. Then, accepting, rejecting, and modifying the hypothesis, based on these comparisons. Finally, continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory. A very will tested and widely accepted theory is referred to as an economic law or an economic principle. An economic principle is a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions. 7) What are economic resources? What categories of economists use to classify them? Why are resources also called factors of production? Why are they called inputs? Economic resources are natural, human, and manufactured resources that go into production of goods and services. Economists classify economic resources into four general categories land, labor, capital, and entrepreneurial ability. Resources are called factors of production because land, labor, capital, and entrepreneurial ability are combined to produce goods and services. Another name for factors of production is inputs 9) Specify and explain the typical shapes of marginal-benefit and marginal-cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product? Explain. Any economic activity should be expanded as long as marginal benefit exceeds marginal cost and should be reduced if marginal cost exceeds marginal benefit. The optimal amount of the activity occurs when marginal benefit is equal to marginal cost. Achieving the optimal output requires the expansion of a goods output until its marginal benefit and marginal cost are equal. No resources beyond that point should be allocated to the product. 10) Explain how (if at all) each of the following events affects the location of a country`s production possibilities curve: a. The quality of education increases
This event affects the location of a country’s production possibilities curve because this is a good for the future. This good allows the economy to flow toward a greater cause. This will improve the quality of human resources. b. The number of unemployed workers increases.
This affects the location of a country’s production possibilities curve on a macro level. The total number of workers unemployed will bankrupt the economy unless they are able to find other jobs. c. A new technique improves the efficiency of extracting copper from ore. This and new and improved technologies contributes to economic growth. d. A devastating earthquake destroys numerous production facilities. This will strain the economy because every resource is exhausted and production possibilities curve will decrease. 11) Suppose that, on the basis of a nation`s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the following statement: “Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.” This information and the statement are related because they are both related to opportunity cost and are no longer to production possibilities curve.
Chapter 2: Page 44; Questions - 1, 4, 7, 11, 12
1) Contrast how a...
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