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习题答案

Chapter 1

Introduction

Questions

1.      Scarcityis a condition that exists when resources are limited relative to the demandfor their use. Another way of describing this condition is to state thatscarcity exists when resources are not available in unlimited amounts. Whenresources are available in unlimited amounts, economists consider them to be“free” goods. Because of the scarcity of resources, choices have to be madeabout their allocation among competing uses. Each choice is considered byeconomists to involve an “opportunity cost” because the use of scarce resourcesin one activity implies that they cannot be used in an alternative one. Inother words, this opportunity cost is the amount that is sacrificed whenchoosing one activity over its next best alternative.

         It isreasonable to assume that all organizations have to work with scarce resources,no matter how large or profitable. A key role that managers play is to decidehow best to allocate their organizations’ scarce resources. From an economicstandpoint, optimal decisions involve their weighing of the benefits associatedwith a particular decision against the opportunity cost of this decision.

2.      “What?”—Thisinvolves deciding what goods and services to produce and in what quantities(e.g., guns versus butter, capital goods versus consumer goods, etc.)

         “How?”—Thisinvolves deciding how best to allocate a country’s resources in the productionof particular goods or services (e.g., capital intensive versus laborintensive, domestic production versus foreign production etc.).

         “Forwhom?”—This involves deciding how to distribute a country’s total output ofgoods and services (e.g., income and wealth distribution).

3.      a.   how

b.   what

c.   for whom

d.   how

e.   how

4.      MarketProcess: The use of supply, demand and material incentives (e.g., the profitmotive) to decide how scarce resources are to be allocated. It answers thethree questions of what, how and for whom in the following ways:

         “What?”—Whateveris profitable will be produced. Profitability in turn depends on the strengthof a society’s demand for a particular good or service and the cost toproducers of providing such a good or service.

         “How?”—Resourcesshould be allocated and combined in the least costly way.

         “Forwhom?”—The output of goods and services should be allocated to whoever iswilling and able to pay for them. Of course the ability to pay depends on thecountry’s distribution of income. Many factors may account for the distributionof income in a market economy. For economists, one of the most important is the“productivity principle.”  This statesthat income is allocated according to the relative productivity of the variousfactors of production.