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1. Why do many economists believe that the market system is the most efficient economic system for allocating resources?
2. What are the four main categories of resources? Explain each of them.
3. (a) Explain what happens in the simple circular flow diagram? (b) What effect do price controls have on the market system?
4. (a) Explain what can we learn from a country's production possibilities curve? (b) How can a nation production possibilities curve shift outward? (c) Why the production possibilities cure is bowed-out in shape?
5. Will a nation tend to export or import goods for which it has comparative advantage? Explain.
6. How can we measure the opportunity cost of producing a good? Using a bowed outward production possibilities curve between ice cream and hammers, identify graphically the opportunity cost of obtaining an additional hammer.
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