Question

	New York Pizzas	Philly Cheesesteaks
Jay-Z	40	120
Solange	50	125

Suppose that Solange and Jay-Z could each make either New York–style pizza or Philly cheesesteaks. Given an eight-hour workday, which of the following would permit them to consume outside their respective production possibilities frontiers (PPFs)

a decrease in resources

a decrease in technology

efficient use of all their productive resources

an “Empire State” of mind

specialization and trade Because of scarcity individuals and societies must choose which wants and needs to satisfy. choices must be made about which resources to use, but not about which wants to satisfy. all choices about wants and using resources must be made by the government. individuals and societies are allowed no choice about which wants and needs to satisfy. choices can be made about which wants to satisfy, but not about which resources to use. To determine which of two producers has a comparative advantage, one would need to know their zero-sum games. levels of investment. increasing relative costs. normative beliefs. opportunity costs of production for both goods.

Answer 1

1. Specialization and trade

Specialization and trade can improve the standard of living in both countries by allowing each country to consume a combination of products outside its production possibilities frontier. Specialization and trade is always based on comparative advantage.

2. Individuals and societies must choose which wants and need to satisfy

The basic economic problem is unlimited wants and needs of human which results in scarcity of resources having alternative uses. Choice is required to be made among various alternative uses of a resource. (Human wants are unlimited but the resources to satisfy them are limited)

3. Opportunity costs of production for both goods

Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost. Economy should specialize in the production of a particular good in which they have comparative advantage over other countries and trade for goods they don’t have. This helps the country to reduce its opportunity cost.