Question

A. What happens if the cost of one material component of a pencil increases? (Check all that apply)

		The price of pencils increase
		It may make another source of a material component of a pencil more desirable.
		Companies will attempt to exploit workers to reduce costs.
		Technology will drive down the price of other material components.

B. Why is the making of a simple pencil such a complex task? (Check all that apply)

		making pencils is easy, almost anyone can do it
		It takes a few large companies or skilled individuals to design a pencil
		It takes millions of people from the world to make a pencil
		It takes governments cooperating with each other to produce pencils.

C. Why is the making of a pencil likened to a symphony? (Check all that apply)

		It takes many people working together and in concert to produce a pencil.
		Because people are self-interested, it is very difficult to make a pencil
		You don't need symphonies to make a pencil, you need factories
		It is likened more like to a practice concert., lots of noise but little harmony

Answer 1

A. Options that apply:

(i) The price of pencils increase- since the marginal cost of producing pencils increases, the supply curve shifts leftward and the equilibrium price of pencils increases.

(ii) It may make another source of a material component of a pencil more desirable.- substitute for the material component may now be relatively cheaper and more desirable.

(iii) Companies will attempt to exploit workers to reduce costs.- the firms may try to neutralize the increase in manufacturing cost by lowering wages.

B. Options that apply:

(ii) It takes a few large companies or skilled individuals to design a pencil.

C. Symphony is a an elaborate musical composition for full orchestra.

Options that apply:

(i) It takes many people working together and in concert to produce a pencil.