Deck 1: Introduction

Question 1

Suppose your friend is strong on defense and insists that we must bolster our national defense, whatever the cost. How can you use economic logic to make him or her aware of the opportunity costs associated with his or her objective

Answer 1

Opportunity cost: The best alternative forgone in order to produce or consume something else; what you give up to get something else.
If we spend a huge amount on defense then we have to lose the production other necessary goods and services. In this case opportunity cost for defense products will be production of other goods and services. We can explain it with the help of an example of two countries Saudi Arabia and Costa Rica. Saudi Arabia is spending near about 9% of its GDP on defense but Costa Rica spends nothing on the defense. But life expectancy in Saudi Arabia is 73 years whereas life expectancy in Costa Rica is 79 years. Why because Costa Rica freeze up resources that can be devoted to health care , education and other life saving measures.

Question 2

Unemployment imposes serious hardship on out-of-work individuals and their families. What are the costs of unemployment to society as a whole (Keep in mind the production possibilities curve.)

Answer 2

Unemployment poses serious hardship on out-of-work individuals and their families and it even costs a lot to the society as a whole.
If unemployment persists in a society then some resources may go unused, factories remain idle and workers are laid off and resources are not used in the most efficient manner. Therefore output and the income reduce in the society as a whole and this situation goes inside the Production Possibility Curve and further increases unemployment.

Question 3

Why, in a rich nation, is it important that we fully use our resources and technology to maximize our nation's output Is it only the level of total output that is important, or are the types of output that we produce also important Do you think that the distribution of this output (and the income generated by its production) is just as important as its total amount

Answer 3

According to Production Possibility Curve, optimum output is when we fully utilize resources. Therefore in a rich nation, it is important that we fully use our resources and technology to maximize our nation's output.
The level of total output as well as the types of output that we produce is important because in our society we need a number of goods and services for development and therefore both the things count equally.
Yes, the distribution of this output is just as important as its total amount because income generated by the production (output) is distributed among the factors of production and which is even income and will in turn increases output. Total amount of the factors of production is always equal to the distribution of output.

Question 4

How do you think our nation's output should be distributed according to income or according to some other standard (such as basic human need)

Question 5

Equilibrium implies that quantity demanded equals quantity supplied at a particular price. Must consumers and producers actually sit down to discuss and decide on an equilibrium market price, such as we may see in a farmers' market or a flea market Why or why not

Question 6

Does the efficiency of the price mechanism ensure that our market-based economy is an equitable one Why or why not

Question 7

The following schedules are for bushels of apples in a local market. Graph the supply and demand curves. What are the equilibrium price and quantity

Now assume that an early freeze has decreased the apple harvest, and the new supply schedule is as follows. Has supply increased or decreased What are the new equilibrium price and quantity (Note that the demand curve is unchanged.)

Question 8

Go to the Web site at http://netec.mcc.ac.uk/JokEc, find a good economics joke, and share it with your teacher!

Question 9

Become familiar with the EconApps Web site at http://www.cengage.com/economics/econapps and explore some of the topics mentioned in the margins of your book. This site includes South-Western's dynamic Web features: EconNews Online, EconDebate Online, and EconLinks Online. Organized by pertinent Economic topics and searchable by topic or feature, these will deepen your understanding of theoretical concepts through hands-on exploration and analysis of the latest economic news stories, policy debates, and data. You, the student, will find this site invaluable.

Question 10

One additional source that may be useful if you need to do research on economics topics is the Web site of the British periodical, The Economist. Its articles on various topics can usually be understood by beginning students of economics. You can find this site at http:// www.economist.com.