Authors libby rittenberg 111
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command socialist and mixed economies are moving in the direction of
market capitalist systems.
The presumption in favor of market-based systems does not preclude a
role for government. Government is necessary to provide the system of
laws on which market systems are founded. It may also be used to provide
certain goods and services, to help individuals in need, and to regulate the
actions of individuals and firms.
CONCEPT PROBLEMS
1. How does a college education increase one’s human capital?
2. Why does the downward-sloping production possibilities curve imply
that factors of production are scarce?
3. In what ways are the bowed-out shape of the production possibilities
curve and the law of increasing opportunity cost related?
4. What is the relationship between the concept of comparative
advantage and the law of increasing opportunity cost?
5. Suppose an economy can produce two goods, A and B. It is now
operating at point E on production possibilities curve RT. An
improvement in the technology available to produce good A shifts the
curve to ST, and the economy selects point E′. How does this change
affect the opportunity cost of producing an additional unit of good B?
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
111
