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| | *the same fixed resources are used for making the same two goods, and technology does not improve | | *the same fixed resources are used for making the same two goods, and technology does not improve |
| | *there is "full employment," such that adding workers requires taking them away from another task | | *there is "full employment," such that adding workers requires taking them away from another task |
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| | + | [[Image:Econ13ab.jpg|right|250px|thumb|Figures A and B]] |
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| | If there are inefficiencies in a nation's economy, then its production will be inside the production possibilities curve. Due to the inefficiencies, the nation will not be producing as much as it could if it were efficient. Just as an increase in capital or an improvement in technology can cause an increase in the production of all goods, an increase in a nation's efficiency can cause its production to increase for all goods, from a point inside the production possibilities curve to a point on the curve. | | If there are inefficiencies in a nation's economy, then its production will be inside the production possibilities curve. Due to the inefficiencies, the nation will not be producing as much as it could if it were efficient. Just as an increase in capital or an improvement in technology can cause an increase in the production of all goods, an increase in a nation's efficiency can cause its production to increase for all goods, from a point inside the production possibilities curve to a point on the curve. |
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| | 1. A ________________ is one and only one buyer in a market. | | 1. A ________________ is one and only one buyer in a market. |
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| − | 2. Why do you think an economics course spends so much studying monopolies and monopsonies? | + | 2. One useful aspect of a production possibilities curve is to show how: |
| | + | <br>(a) it is possible for a nation to increase production of all its goods at the same time. |
| | + | <br>(b) transaction costs cause a trade-off in goods produced. |
| | + | <br>(c) a scarcity of resources causes a trade-off in goods produced. |
| | + | <br>(d) in the long run, average total costs can be minimized. |
| | + | <br>(e) an indifference curve can be expressed in graphical form. |
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| | + | Explain your answer. |
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| | 3. What is the marginal factor cost of a monopsony when it increases is wage for 10 employees from $11 to $12 in hiring an 11th employee? Show your work. | | 3. What is the marginal factor cost of a monopsony when it increases is wage for 10 employees from $11 to $12 in hiring an 11th employee? Show your work. |
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| | 5. Max unionized all the employees in an industry and then tried to increase both their wages and the number of people employed. Is this possible? Are there conditions which would make it possible? | | 5. Max unionized all the employees in an industry and then tried to increase both their wages and the number of people employed. Is this possible? Are there conditions which would make it possible? |
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| − | [[Image:Econ13ab.jpg|right|250px|thumb|Figures A and B]]
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| | 4. Look at Figure B (right). If the price of sale falls below P1 then the firm in the short run will (a) increase Q, (b) increase labor, (c) increase price, or (d) shut down. How much profit is it making at a price of P2? | | 4. Look at Figure B (right). If the price of sale falls below P1 then the firm in the short run will (a) increase Q, (b) increase labor, (c) increase price, or (d) shut down. How much profit is it making at a price of P2? |