This chapter introduces comparative advantage and shows that having people specialize in the production in which they are relatively more efficient allows the production of more of everything. It introduces the production possibilities curve and develops the production possibilities model to show precisely how specialization enhances the productive capacity of an economy
Multiple Choice 1. Equilibrium a. is a concept unique to economics. b. always occurs where supply equals demand. C. results when opposing forces fail to cancel each other out. d. indicates balance. e. all of the above
1. A situation is efficient if a. no change can help some people without hurting others. b. the gain for some people offsets the loss for others. .C. the gain for some people more than offsets the loss to others. d. consumer surplus is maximized. e. producer surplus is maximized
Chapter 7 develops the concept of efficiency and explores why many tasks are best left up to the market It presents the concept of economic surplus in detail and looks at how unregulated markets can generate the largest possible economic surplus Chapter 7: Efficiency and Exchange
1. Which of the following best explains why wages in service industries have increased along with wages in manufacturing industries, even though service industry productivity has not increased as much? because
1. Price changes affect quantity demanded for two reasons: They attractiveness of substitute goods and they alter the real value of the consumers purchasing power. The second effect grows larger as the share of the consumers