Ch. 2 Review - Econ

Which of the entries in List 1 are consumption goods and services? Explain your choice. An interstate highway An airplane A school teacher A stealth bomber A garbage truck A pack of bubble gum President of the United States A strawberry field A movie An ATM

A pack of bubble gum and a movie are consumption goods. They are purchased by consumers.

Compare the scale of agricultural production in the advanced and developing economies. In which is the percentage higher? In which is the total amount produced greater?

Agriculture is a small part of total production in advanced economies. It is a much larger part in developing economies. Even though advanced economies devote only a small part of their total production to agriculture, they still produce about one third of the world's total production of food. The remaining two thirds is produced in the developing nations.

Which of the entries in List 1 are capital goods? Explain your choice. An interstate highway An airplane A school teacher A stealth bomber A garbage truck A pack of bubble gum President of the United States A strawberry field A movie An ATM

An airplane, a garbage truck, and an ATM are capital goods. All provide services to produce other goods and services. The interstate highway and the stealth bomber also are capital goods. They provide services (transportation and defense) that help produce other goods and services.

Which of the entries in List 1 are factors of production? Explain your choice. An interstate highway An airplane A school teacher A stealth bomber A garbage truck A pack of bubble gum President of the United States A strawberry field A movie An ATM

An interstate highway, an airplane, a school teacher, a stealth bomber, a garbage truck, the President of the United States, a strawberry field, and an ATM are factors of production. A school teacher and the President are labor; an interstate, an airplane, a stealth bomber, a garbage truck, and an ATM are capital; and a strawberry field is land

State some of the tradeoffs that Boeing faces in making the Dreamliner.

Boeing faced a huge number of tradeoffs. For example, when designing the plane, Boeing's engineers had to make decisions about fuel economy and passenger load. Increasing the passenger load decreased fuel economy, so the engineers traded passenger load for fuel economy. Another example revolves around the construction of the Dreamliner. Boeing could have constructed the plane using just a few companies but instead it used over 400. Boeing was trading off the simplicity of dealing with just a handful of companies for the increased specialization by dealing with many specialized economies.

Why doesn't Boeing manufacture all the components of the Dreamliner at its own factory in the United States?

Boeing wants to manufacture the Dreamliner at the lowest possible cost. It would be more expensive for Boeing to manufacture Dreamliners at its own factory in the US because Boeing does not have the expertise possessed by its subcontractors and because the wages Boeing pays US workers exceed the wages its subcontractors pays their workers.

Why might Boeing's decisions in making the Dreamliner be in the social interest?

Building the Dreamliner itself advances the social interest because it increases the quantity of comfortable, rapid transportation. The amount of high-quality transportation available in the economy increases, which benefits society. The decisions in making the Dreamliner advance the social interest because they were designed to make the Dreamliner at low cost and thereby avoid wasting resources.

On a diagram of the circular flow model, indicate in which real or money flow each entry in List 2 belongs. - General Motors pays its workers wages.

General Motor wage payment is a money flow that is a payment for use of the services of a factor of production and so flows out of the factor market to households.

In the African nation of Senegal, to enroll in school a child needs a birth certificate that costs $25. This price is several weeks' income for many families. Explain how this requirement is likely to affect the growth of human capital in Senegal.

Human capital growth depends, in part, on the extent of schooling: More schooling means more human capital. Because of Senegal's hefty fee for a required birth certificate, fewer children will enroll in school, thereby decreasing Senegal's human capital growth.

On a diagram of the circular flow model, indicate in which real or money flow each entry in List 2 belongs. - IBM pays a dividend to its stockholders.

IBM's dividend payment is a money flow that is a payment for use of the services of a factor of production and so flows out of the factor market to households. (it flowed into the factor market from IBM, a firm)

Describe some of the changes in what, how, and for whom that would occur if Boeing manufactured all the components of the Dreamliner at its own factories in the United States.

If Boeing manufactured all the components of the Dreamliner at its own factories in the US, more components would be produced in the US and more capital would have been used in their production. US workers and investors would have received higher incomes, but the Dreamliner would cost more to produce so Boeing would have earned a lower profit.

How is the personal distribution of income in India changing?

If the number of millionaires is growing more rapidly than the number of other income groups, it will be the case that the personal distribution of income in India is becoming less equally distributed.

On a diagram of the circular flow model, indicate in which real or money flow each entry in List 2 belongs. - Nike pays Serena Williams for promoting its sports shoes.

Serena Williams is a factor of production, so the flow is a money flow from the factor of markets to households in exchange for Ms.Williams' services of promoting the sports shoes.

On a diagram of the circular flow model, indicate in which real or money flow each entry in List 2 belongs. - Southwest rents some aircraft.

The aircraft are factors of production, so the flow is the services from these factors of production from the factor markets to firms.

China's income gap widens The income gap has widened in China. In 2014, the pay of workers in the coastal regions increased by 9.7 percent while that of workers in the inland regions grew by 9 percent. Explain how the distribution of personal income in China can be getting more unequal even though the poorest are getting richer.

The distribution of income in China can be getting more unequal even when the poorest are getting richer if the richest are getting richer even faster. If the rich are getting richer faster, the fraction of the nation's total income received by the poorest 20 percent falls, which makes the personal distribution of income more unequal.

Why might incomes of $1 a day and $2 a day underestimate the value of the goods and services that these households actually consume?

The people living on $1 and $2 a day probably grow a lot of their own food and produce a lot of their own clothing and shelter. If these goods and services are not taken into account, their share of goods and services is understated. Including them raises the value of the goods and services these households actually consume.

The global economy has seen a fall in the number of landlines and rapid growth in the number of smartphones. In the United States, 41 percent of households have no landline and 90 percent have a smartphone. In Africa, 33 percent have a smartphone. Describe the changes in what, how, and for whom telecommunication services are produced in the global economy.

What: As the number of cell phone users increases, the global economy has been producing more cell phone telecommunication services. More cell phones are produced, fewer land phones are produced, and presumably more cell phone frequencies are used. How: More telecommunication services are being produced using cell phones rather than fixed-line phones. For whom: While the amount of telecommunication services has been rising throughout the world, it has been increasing most rapidly in Africa. So more telecommunication services are being produced for residents of Africa as well as for residents in the rest of the world.

On a diagram of the circular flow model, indicate in which real or money flow each entry in List 2 belongs. - You buy your groceries.

Your purchase of groceries represents a money flow from households to the goods market.