Econ 2301 Chap 1

Which scenario below is an example of scarcity?

A factory has a large need for highly skilled workers, however the majority of applicants do not have any work experience. Reason: Because the factory has a demand for highly skilled workers, but none exist in the area, there is a shortage of labor for these positions. Because we are able to create diamonds in a lab, they are no longer scarce. Similarly, fracking has increased the availability of natural gas which has lowered energy prices because it is not viewed as a scarce resource. There is no shortage of individuals interested in adopting kittens.

Which of the following is not an example of scarcity?

Amanda can play a song as many times as she likes with no additional cost to her. Reason: Scarcity means that human wants for goods, services and resources exceed what is available. Amanda being able to play a song as many times as she likes with no additional cost to her is not an example of scarcity.

This statement is of interest to a microeconomist: "Last quarter, GDP growth for the U.S. economy was at 1.2%, slightly below what was expected."

False Reason: Macroeconomists are concerned with the economy as a whole, focusing on issues such as GDP growth, unemployment, and inflation.

According to Adam Smith, specialization results in higher levels of output for all of the following reasons except:

Specialization allows workers to experiment with different tasks to see which responsibilities make them happiest at work. Reason: Specialization results in higher levels of output because it allows workers to focus their labor where they have an advantage and potentially learn to produce more quickly in their areas of specialization. Additionally, firms may be allowed to take advantage of economies of scale because of specialization. However, specialization does not necessarily contribute to making workers more happy at work.

Economies of scale occur when the production of goods increases and the average cost of production decreases.

True Reason: This is the definition of economies of scale - as production increases, the average cost of production for each unit decreases.

The division of labor may also be referred to as human specialization. Overall, it is beneficial to firms because it ____________.

increases output by enabling workers to take advantage of differences in their skills Reason: A group of workers, each specializing in certain tasks, can produce more than the same number of workers who try to produce the entire good or service by themselves. Specialization results in higher levels of output because it allows workers to focus their labor where they have an advantage and potentially learn to produce more quickly in their areas of specialization.