Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Solutions to Chapter 1 True or False Question 1. Scarcity of resources means that available resources are insufficient to satisfy all True/False TRUE wants and needs. 2. Wants are satisfied by the production of goods and services. TRUE 3. A good which can produce further goods or services is a capital good. TRUE 4. The economic problem has been solved in developed economies. FALSE 5. Positive economics describes “what ought to be”. FALSE 6. Production is the conversion of inputs into outputs. TRUE 7. Opportunity cost measures the next best use of an available resource. TRUE 8. In a command economy the means of production are privately owned. FALSE 9. The good feeling we get out of doing something for somebody else is not an FALSE incentive to do it. 10. Economic assumptions are always realistic. FALSE 11. Economics is the study of the allocation of scarce resources. TRUE 12. Australia uses a market economic system. FALSE Solutions to Chapter 1 Review Questions 1. ( a ) Who will produce. 2. ( d ) Normative economics. 3. ( c ) Positive economics. 4. ( c ) Mixed economy. 5. 1. Scarce resource something that is limited and can be used up 2. Opportunity cost the trade off when one alternative is chosen over another 3. Mixed economy An economy that takes advantage of the benefits of both free trade and some government intervention 4. Free market economy An economy where there is minimal government intervention or regulation 5. Positive economics 6. When economists state a fact Economics is the study of the allocation of scarce resources among unlimited wants. It is also a study of human behaviour, that is, how people choose to allocate these scarce resources to maximise satisfaction and minimise opportunity cost. 7. A resource is anything that can be consumed that is limited in nature. Resources are limited because they can be used up, that is, they are finite. Resources are also known as factors of production. Examples include water, oil and iron ore. 8. Bill will not be completely satisfied with either purchase because by purchasing one of the two goods he is giving up consuming the other good. Therefore, either way, Bill will have an unsatisfied want. 9. What to produce? – This involves deciding which goods and services will satisfy the most wants. How much to produce? - What relative amounts of each good and service produced will satisfy the most wants? How to produce? – What is the most efficient way of using the factors of production to produce these goods and services? Who consumes? – This affects how total production is distributed amongst the members of society. 10. (a) (b) (c) The trade-off the Government is facing is between building the rail line and the national broadband network. The government cannot produce both with the same resources. The opportunity cost of the National Broadband Network (NBN) is the next best alternative, in this case building the new rail line. The opportunity cost of the new rail link is the next best alternative choice, in this case it is building the National Broadband Network. 11. The unemployment rate in Australia is expected to reach 5% The clearance in the Sydney property market is 68% The RBA cash rate of 3.75% is too high and must be raised The spot copper price is too high and is set for a correction People respond to incentives Australians do not eat enough fruit Positive Positive Normative Normative Positive Normative 12. (a) (b) (c) The parking ticket (fine) if you are caught not putting money in the meter. The good feeling you get from providing the community with the service. Higher income. 13. The production possibility frontier is a graph that shows the set of all feasible production combinations of producing two alternate goods. This includes the highest possible amount of production possible which is the outer edge of the frontier. It is a good example of the trade-off that an economy faces because on the edge of the frontier an increase in the production of one good can only be achieved by reducing the production of another good. 14. Households provide the factors of production; land, labour and capital, to firms in the circular flow of funds. The factors of production are bought and sold in the factor market. 15. A command economy in one where a central authority of government controls every aspect of the economy. Cuba and North Korea are two examples of current economies that still have some elements of command economies. In these countries the government plans levels of production and owns most industries. 16. A mixed economy is one that contains elements of a free market economy but also has some government intervention. Australia and New Zealand are two examples of mixed economies as they both have free market elements and some government intervention such as taxes, and public goods such as hospitals, parks, roads etc.