each question should be one paragraph in length
What is the fundamental problem economists study?
What is the purpose of studying economics? (Explain productive and allocative efficiency in your response.)
What is marginal analysis? (Explain using an example)
When most people want to know the cost of an item or a service, they look for a price tag. When economists want to determine cost, they go one step further. They use the idea of opportunity cost.
Explain the concept of opportunity cost and illustrate with an example.
Next explain the concept of increasing opportunity costs and illustrate with an example.
Given a production possibility model with “Food” on the Y-axis and “Tractors” on the X-axis, use the concept of opportunity cost to explain why poor countries find it hard to grow their economies.
In a command economy, the government decides what goods and services to produce from the scarce resources available to the society, how to produce those goods and services (i.e. will it use either a labor or a capital intensive method of production), and for whom (who will get the goods and services produced) based on objectives as established by the government.
With reference to the adjustment process that occurs following an increase in demand for a specific good such as bread, explain:
How prices are established in a market economy,
How these market prices determine the answers to the three questions of what, how, and for whom to produce, and
How a negative production externality creates an inefficient outcome resulting in a deadweight loss and provide an example of how government intervention can theoretically improve on the market outcome.