Question

1. How does scarcity relate to the study of economics? (1 point)

2. What is the difference between labor and human capital? (1 point)

3.What is the circular flow model? Explain how the two types of flows relate to each other. (1.5 points)

4. Give an example of one resource that is scarce in your country and an example that a resource that is abundant in your country. How are these resources traded in the world market if at all? (1.5 points)

5. The table shows the PPF of an island community. Choose the best statement. (1 point)

A.   This community has enough resources to produce 2 pounds of fish and 36 pounds of berries.

B.   This community cannot produce 2 pounds of fish and 36 pounds of berries because this combination is inefficient.

C.   This community will waste resources if it produces 2 pounds of fish and 22 pounds of berries.

D. This community can produce 2 pounds of fish and 30 pounds of berries but this combination is inefficient.

Possibility	Fish (pounds)		Berries (pounds)
A	0	and	40
B	1	and	36
C	2	and	30
D	3	and	22
E	4	and	12
F	5	and	0

6. The table above shows the PPF of an island community. Choose the best statement. (1 point)

A.   Suppose that this community produces 3 pounds of fish and 20 pounds of berries. If it decides to gather more berries, it faces a tradeoff.

B.   When this community produces 4 pounds of fish and 12 pounds of berries it faces a tradeoff, but it is inefficient.

C.   Suppose that this community produces 5 pounds of fish and 0 pounds of berries. If it decides to gather some berries, it will get a free lunch.

D. If this community produces 3 pounds of fish and 22 pounds of berries, production is efficient but to produce more fish it faces a tradeoff.

7. How could the production possibilities frontier of your country be expanded in the most effective way? (1.5 points)

8. Which recommendation, or recommendations (up to 3 maximum) would you give to the president of your country in order to enhance the well-being of your country’s economy? Explain the reason behind your recommendations. (1.5 points)

Answer 1

1. Economies is the study of production, consumption and distribution of wealth and income in the presence of two key axioms- unlimited wants and scarce resources.

The economic theory believes that humans have unlimited wants but the resources to fulfill these wants are limited. That is, resources are scarce. The presence of this scarcity puts the importabt questionnif resource allocation. How must resources be allocated among different uses to obtain optimak and efficient utilization.

Had the resources been availabke in abundance, the question of resource allocation might not even have arose. The scarcity of resources is thus the building block of all economic theories.