Microeconomics,, 16th Canadian Edition

(Sean Pound) #1


4. Explain the three economic concepts illustrated by the production
possibilities boundary.
5. Explain why a technological improvement in the production of
one good means that a country can now produce more of other
goods than it did previously. Hint: Draw a country’s production
possibilities boundary to help answer this question.
6. In this chapter we used a simple idea of a production possibilities
boundary to illustrate the concepts of scarcity, choice, and
opportunity cost. We assumed there were only two goods—call
them X and Y. But we all know that any economy produces many
more than just two goods. Explain why the insights illustrated in
Figure 1-2 are more general, and why the assumption of only
two goods is a useful one.
7. Imagine a hypothetical world in which all Canadian families had
$80 000 of after-tax income.
a. In such a world, would poverty exist in Canada?
b. In such a world, would scarcity exist in Canada?
c. Explain the difference between poverty and scarcity.
8. What is the difference between microeconomics and
9. For each of the following situations, explain how a change in the
stated “price” is likely to affect your incentives regarding the
stated decision.

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