Question 1. Why do many economists believe that the market system is the most efficient economic system for allocating resources?
Question 2. What are the four main categories of resources? Explain each of them.
Question 3. (a) Explain what happens in the simple circular flow diagram? (b) What effect do price controls have on the market system?
Question 4. (a) Explain what can we learn from a country's production possibilities curve? (b) How can a nation's production possibilities curve shift inward? (c) Why the production possibilities cure is bowed-out in shape?
Question 5. Will a nation tend to export or import goods for which it has comparative advantage? Explain.
Question 6. Consider a professor who is writing a book. The professor can both write the chapters and gather the data faster than anyone else in the university. Still he pays a student to collect the data at the library. Is this sensible? Explain.