Business Economics Solutions Mba
Business Economics
MBA
LIMITS, CHOICES AND SCARCITY
ANSWERS TO END-OF-CHAPTER QUESTIONS
2-1 Explain this statement: “If resources were unlimited and freely available, there would be no subject called economics.” If resources were unlimited and freely available, making choices would not be necessary. Every person could have as much as they wanted of any good or service. Economics, the science of choice, would be unnecessary.
2-2 Comment on the following statement from a newspaper article: “Our junior high school serves a splendid hot meal for $1 without costing the taxpayers anything, thanks in part to a government subsidy.” Obviously the writer is confused. Government subsidies come from government revenues and taxpayers are the source of tax revenues. It may be true that local property taxes that fund the junior high school are not being used for the lunches, but the federal government’s funds do come from taxpayers across the country, including those in the town with the junior high. This example helps support the saying, “There ain’t no such thing as a free lunch!”
2-3 Critically analyze: “Wants aren’t insatiable. I can prove it. I get all the coffee I want to drink every morning at breakfast.” Explain: “Goods and services are scarce because resources are scarce.” Analyze: “It is the nature of all economic problems that absolute solutions are denied us.” It may be that you get all the coffee you want on a particular morning, but will that satisfy your wants forever? Not if you want coffee in the future. Therefore, even your desire for coffee is insatiable over time. Goods and services are the product of resources. If resources were abundant without limit, then we would not have a scarcity of the products they produce. Economic problems are problems of relative scarcity—wants exceed resources in the relative sense. We cannot absolutely solve all of our economic problems; that is, satisfy
MBA
LIMITS, CHOICES AND SCARCITY
ANSWERS TO END-OF-CHAPTER QUESTIONS
2-1 Explain this statement: “If resources were unlimited and freely available, there would be no subject called economics.” If resources were unlimited and freely available, making choices would not be necessary. Every person could have as much as they wanted of any good or service. Economics, the science of choice, would be unnecessary.
2-2 Comment on the following statement from a newspaper article: “Our junior high school serves a splendid hot meal for $1 without costing the taxpayers anything, thanks in part to a government subsidy.” Obviously the writer is confused. Government subsidies come from government revenues and taxpayers are the source of tax revenues. It may be true that local property taxes that fund the junior high school are not being used for the lunches, but the federal government’s funds do come from taxpayers across the country, including those in the town with the junior high. This example helps support the saying, “There ain’t no such thing as a free lunch!”
2-3 Critically analyze: “Wants aren’t insatiable. I can prove it. I get all the coffee I want to drink every morning at breakfast.” Explain: “Goods and services are scarce because resources are scarce.” Analyze: “It is the nature of all economic problems that absolute solutions are denied us.” It may be that you get all the coffee you want on a particular morning, but will that satisfy your wants forever? Not if you want coffee in the future. Therefore, even your desire for coffee is insatiable over time. Goods and services are the product of resources. If resources were abundant without limit, then we would not have a scarcity of the products they produce. Economic problems are problems of relative scarcity—wants exceed resources in the relative sense. We cannot absolutely solve all of our economic problems; that is, satisfy