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Exploring Macroeconomics

Robert L. Sexton

Chapter 3

Scarcity, Trade-Offs, and Production Possibilities - all with Video Answers

Educators


Chapter Questions

01:06

Problem 1

What are the three basic economic questions? How are decisions made differently in a market economy than in planned economies?

Daniel Cisneros
Daniel Cisneros
Numerade Educator
10:45

Problem 2

Recently the American Film Institute selected Citizen Kane as the best movie of all time. Citizen Kane is a fictional psychological biography of one of the most powerful newspaper publishers in history, William Randolph Hearst. Avatar has made the most money of any film in history. Unlike Auatar, Citizen Kane was not a box office success. Do you think Hollywood will make more movies like Avatar or like Citizen Kame? Why?

Stephanie Carter
Stephanie Carter
Numerade Educator
04:32

Problem 3

As women's wages and employment opportunities have expanded over the past 50 years, Americans have purchased more and more labor-saving home appliances like automatic washers and dryers, dishwashers, and microwave ovens. Do you think these phenomena are related? Could higher wages and better job opportunities lead to a more capital-intensive way of performing household chores? Explain.

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
00:29

Problem 4

Identify where the appropriate entries go in the circular flow diagram. ( diagram CANT COPY )

Gaurav Dalal
Gaurav Dalal
Numerade Educator
02:16

Problem 5

Identify whether each of the following transactions takes place in the factor market or the product market.
a. Billy buys a sofa from Home Time Furniture for his new home.
b. Home Time Furniture pays its manager her weekly salary.
c. The manager buys dinner at Billy's Café.
d. After he pays all of his employees their wages and pays his other bills, the owner of Billy's Café takes his profit.

Heather Duong
Heather Duong
Numerade Educator

Problem 6

Given the following production possibilities curve:
a. Does this production possibilities curve show increasing opportunity costs? Explain.
b. What is the opportunity cost of moving from point $\mathrm{I}$ to point D? Explain.
c. What is the opportunity cost of moving from point $C$ to point $B$ ?
d. Which of points A-E is the most efficient? Explain.

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Problem 7

During wartime, countries shift production from civilian goods, like automobiles and clothing, to military goods, like tanks and military uniforms. When the United States entered World War I in April 1917, for example, the federal government created the War Industries Board and charged it with determining production priorities and converting plants to meet war needs. In the following year, automobile production fell 43 percent as output of military vehicles soared. When the war ended, 19 months later, in November 1918 , the government cancelled $$\$ 2.5$$ billion in military contracts and the nation resumed normal production. Assuming that in 1917 the United States was at point A on the production possibilities curve shown, show what happened between April 1917 and November 1918. Show what happened once the war ended.

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Problem 8

How would the following events be shown using a production possibilities curve for housing and food?
a. The economy is experiencing double-digit unemployment.
b. Economic growth is increasing at more than 5 percent per year.
c. Society decides it wants less housing and more food.
d. Society decides it wants more housing and less food.

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02:10

Problem 9

In A Bend in the River, Nobel Prize winner V. S. Naipaul describes a developing country in which the government's constantly changing tax policies and vague laws regarding property ownership cause entrepreneurs to become demoralized and unresponsive to economic opportunities. Could this be a case of idle or unemployed entrepreneurs? How can tax laws and rules governing property affect entrepreneurs' willingness to start new businesses or improve existing enterprises?

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
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Problem 10

Using the following table, answer the questions:
$$
\begin{array}{lrrrrr}
\hline & {\text { Combinations }} \\
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\
\text { Guns } & 1 & 2 & 3 & 4 & 5 \\
\text { Butter } & 20 & 18 & 14 & 8 & 0 \\
\hline
\end{array}
$$
a. What are the assumptions for a given production possibilities curve?
b. What is the opportunity cost of one gun when moving from point $B$ to point $C$ ? When moving from point $D$ to point E?
c. Do these combinations demonstrate constant or increasing opportunity costs?

Rashmi Sinha
Rashmi Sinha
Numerade Educator
02:11

Problem 11

Economy A produces more capital goods and fewer consumer goods than Economy B. Which economy will grow more rapidly? Draw two production possibilities curves, one for Economy A and one for Economy B. Demonstrate graphically how one economy can grow more rapidly than the other.

Nick Johnson
Nick Johnson
Numerade Educator

Problem 12

Why one nation experiences economic growth and another doesn't is a question that has intrigued economists since Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Explain why each of the following would limit economic growth.
a. The politically connected elite secure a large share of a country's output and put the proceeds in Swiss banks.
b. A country has a very low output per person.
c. The national philosophy is to live for the moment and forget about tomorrow.
d. The government closes all of the schools so more people will be available for work.
e. The country fears military invasion and spends half of its income on military goods.

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Problem 13

How does education add to a nation's capital stock?

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03:34

Problem 14

A politician running for U.S. president promises to build new schools and new space stations during the next four years without sacrificing any other goods and services, Using a production possibilities curve between schools and space stations, explain under what conditions the politician would be able to keep his promise.

Victoria Dollar
Victoria Dollar
Numerade Educator