A n s w e r s t o t h e R e v i e w Q u i z Page 2 1. List some examples of the scarcity that you face. Examples of scarcity common to students include not enough income to afford both tuition and a nice car, not enough learning capacity to study for both an economics exam and a chemistry exam in one night, and not enough time to allow extensive studying and extensive socializing. 2. Find examples of scarcity in today’s headlines. A headline in the Chicago Tribune on July 10, 2012 was “Parents Sue to Block Changes in Home care for Children.” This story discusses how the state of Illinois was trying to decrease home care on “technology dependent” ill children in order to “force … [them] out of their homes and into institutional care.” The story points out that the scarcity in-home nursing care had led to high costs, which the state was trying to decrease by moving the children into hospitals where skilled nursing care is more readily available. 3. Find an example of the distinction between microeconomics and macroeconomics in today’s headlines. Microeconomics: On July 9, 2012 a headline in The Wall Street Journal was “Lenovo Keeps Production In-House.” This story covers a microeconomic topic because it discusses computer manufacturer Lenovo has decided to produce its own computers rather than out-source them to companies that specialize in their production. Macroeconomics: On July 9, 2012, a headline in The New York Times was “Obama Poised for New Fight with G.O.P. Over Tax Cuts.” This story covers a macroeconomic topic because it concerns taxes in the entire economy. Page 9 1. Describe the broad facts about what, how, and for whom goods and services are produced. What gets produced is significantly different today than in the past. Today the U.S. economy produces more services, such as medical operations, teaching, and hair styling, than goods, such as pizza, automobiles, and computers. How goods and services are produced is by businesses determining how the factors of production, land, labor, capital and entrepreneurship, are combined to make the goods and services we consume. Land includes all natural resources, both renewable natural resources such as wood, and nonrenewable natural resources such as natural gas. Labor’s quality depends on people’s human capital. In the U.S. economy, human capital obtained through schooling has increased over the years with far more people completing high school and attending college than in past years. Finally, for whom are goods and services to be produced depends on the way income is distributed to U.S. citizens. This distribution is not equal; the 20 percent of people with the lowest income earn about 5 percent of the nation’s total income while the 20 percent of people with the highest incomes earn about 50 percent of total income. On the average, men earn more than women, whites more than non-whites, and college graduates more than high school graduates.