Answers to the Review Quiz

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 New York Times on May 8, 2010 was "Containment Effort Inches Closer to Oil Target. This story discusses how "A giant steel container meant to capture oil leaking into the Gulf of Mexico was lowered to within 200 feet of the seafloor." The story points out that the scarcity of oil has lead to drilling in deepwater locations, with the attendant risk of extensive oil spills.

3.

Find an illustration of the distinction between microeconomics and macrocconomics in today's headlines.

Microeconomics. On May 7, 2010 a headline in The Wall Street Journal was "Cape Wind to Sell 50% of Offshore Output to National Grid." This story covers a microeconomic topic because it discusses how a wind farm located off Cape Cod has signed a deal to sell half of its power output to a utility company in Massachusetts. Macroeconomics. On May 8, 2010, a headline in The New York Times was "Economy Gains Impetus as U.S. Adds 290,000 Jobs," This story covers a macroeconomic topic because it concerns employment in the entire economy.

Page 7

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, labour, 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. Labour'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.