Econ Macro Economics

Factors of production, Scientific theory, Supply (economics)

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...
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