1. When can an economy increase the production of one good without reducing the output of another?

2. In which of the three basic questions facing any society does technology play the greatest role?

3. Explain the important difference between a straight-line PPF and the PPF that is concave to (bowed away from) the origin.

4. How would unemployment be shown on the PPF?

5. List three factors that can contribute to an economy’s growth.

6. How can a country that does not have an absolute advantage in producing goods still benefit from trade?

7. China’s tremendous growth rate over the past two decades has allowed its economic output to nearly catch up to that of the United States. If China continued to grow much faster than the United States, would this eventually lead to the elimination of scarcity in China?

8. Describe how a country producing more capital goods than consumption goods ends up in the future with a PPF that is larger than that of a country that produces more consumption goods and fewer capital goods.

9. The United States has an absolute advantage in making many goods, such as short-sleeved cotton golf shirts. Why do Indonesia and Bangladesh make these shirts and export them to the United States?

10. Why is it that the United States uses heavy street-cleaning machines driven by one person to clean the streets, while China and India use many people with brooms to do the same job?

11. If specialization and trade as discussed in this chapter lead to a win-win situation in which both countries gain, why is there often opposition to trade agreements and globalization?

12. The issue of climate change has risen to the forefront of economic discussion, especially among industrialized countries such as the United States and those in Europe. Critics, however, argue that greater environmental regulations restrict economic growth. Explain how relatively wealthy countries might react differently to this tradeoff compared to poor countries.

13. According to an April 4, 2015, New York Times report, California experienced the most severe drought in over a millennium from 2011 to 2015, when reservoirs and underground aquifers that farmers, households, and businesses depend on dried up. As a result, California’s governor ordered a major cut in water usage statewide that made it harder to live and work in the Golden State. If the drought forces some households and businesses to move out of California, what might happen to California’s ability to achieve economic growth? Illustrate your answer using a PPF.

14. At the 2015 White House Science Fair, a $240 million private-public initiative was announced for the purpose of boosting STEM (science, technology, engineering, and math) education, as the United States continues to fall behind other industrialized nations in student achievement in these fields. How would spending on STEM initiatives today, which leads to higher costs in the near term, pay off in future benefits to the economy?

15. Iceland and Denmark both produce skis and sleds. Iceland can produce 3 skis or 6 sleds using one day of labor, while Denmark can produce 4 skis or 12 sleds using one day of labor. Which country has an absolute advantage in producing skis? Sleds? Which country has a comparative advantage in producing skis? Sleds? Are gains from trade possible between Iceland and Denmark? If yes, which good should each country specialize in producing?

16. The table below shows the potential output combinations of oranges and jars of prickly pear jelly (from the flower of the prickly pear cactus) for Florida and Arizona.

17. According to By the Numbers, in which period (1965-1990 or 1990-2015) did corn and soybean production increase more in terms of yield per acre?

18. According to By the Numbers, during the period between 1997 and 2015, in how many years did the U.S. trade balance improve from the previous year and in how many years did the trade balance deteriorate? (Assume the trade balance deteriorated from 1996 [not shown in the figure] to 1997.)